DRIVE
ANNUAL REPORT 2013/14
CONTENTS
History, Vision, Mission and Values ................................................................ 3
Operational highlights ................................................................................... 3
Financial highlights ...................................................................................... 4
Events of the year ......................................................................................... 6
Milestones .................................................................................................... 8
Chairman’s review ...................................................................................... 10
Chief executive officer’s review of operations ............................................... 14
Management review..................................................................................... 20
Statement of value added and distributed ................................................... 37
Distributor network ..................................................................................... 38
Sustainability review.................................................................................... 40
Stewardship................................................................................................ 59
Group structure........................................................................................... 60
Board of Directors ...................................................................................... 62
Senior Management Team of UML ............................................................... 66
Subsidiaries’ CEOs ...................................................................................... 69
Senior Management of Subsidiaries & Jointly Controlled Entities ................. 70
Corporate governance ................................................................................. 71
Nomination committee report .................................................................... 89
Remuneration committee report .................................................................. 90
Audit committee report ............................................................................... 91
Enterprise risk management ....................................................................... 93
Annual report of the board of directors ....................................................... 97
Financial reports ...................................................................................... 103
Statement of director’s responsibility ........................................................ 104
Directors’ statement on internal controls ................................................... 105
CEO and CFO’s responsibility statement .................................................... 106
Independent auditor’s report ..................................................................... 107
Statements of comprehensive income ....................................................... 108
Statements of financial position ................................................................ 109
Statements of changes in equity ............................................................... 110
Statements of cash flows .......................................................................... 111
Notes to the financial statements .............................................................. 112
Share information ..................................................................................... 161
Ten year summary - group ......................................................................... 165
Investor information ................................................................................. 166
Glossary of financial terms ....................................................................... 167
Notice of meeting ..................................................................................... 169
Notes ........................................................................................................ 170
Proxy form ................................................................................................ 171
Corporate information .............................................................Inner back cover
DRIVE
ANNUAL REPORT 2013/14
United Motors has long believed that taking the
long-term view of our operations and how they
impact upon the community and the environment
is integral to responsible business. We are deeply
committed to drive the best practices of
sustainability across every level of our company.
A single-minded focus towards this common
purpose now defines the United Motors team, where
all of us are equally responsible for the acceleration
of these values across our enterprise.
At United Motors, we are geared for growth; fuelled
by the passion to create a stable, sustainable and
successful operation, driven by all of us, together.
HISTORY
VISION
VALUES
The Company was incorporated
in 1945 as a Private Limited
Liability Company. It was vested
with the Government on 8 March
1972 and carried on operations as
the Government Owned Business
Undertaking (GOBU) of United Motors.
In 1985, the Company entered into a
distributor agreement with Mitsubishi
Motors Corporation, Japan and has
since then been the sole distributor
for brand new Mitsubishi vehicles
in Sri Lanka. In 1989 the Company
was selected as the first Government
venture for ‘Peoplisation’ with the
intention of broadening its ownership
amongst the public. Accordingly, on 9
May 1989, the Company was renamed
as United Motors Lanka Limited and
incorporated as a Public Limited
Liability Company. On 30 August
2007, the Company was re-registered
under the new Companies Act No.
07 of 2007 as United Motors Lanka
PLC. Since becoming a Public Limited
Liability Company, United Motors has
achieved remarkable results and is
a leading blue-chip company in Sri
Lanka today.
To be the best company in Sri
Lanka through diversification whilst
maintaining the leadership position in
the transport industry.
Our customers and our business: we
believe in being customer oriented
and possess a policy of providing
first place to the customer. Customer
needs drive our choice of products
and services and the way we deliver
them.
MISSION
To delight and make lifelong
relationships with our customers
by providing high quality products,
services and transport solutions
using state-of-the-art technology and
developing a team of people who
are committed to excellence with the
highest level of integrity through a
corporate culture that encourages
participative management to create a
socially responsible corporate entity,
whilst ensuring optimum returns to
shareholders.
Our people are our most valuable
asset: we will retain and develop
quality people committed to working
as a team to fulfil our corporate
mission. We will provide our staff with
the opportunity to realize their full
potential and cultivate their abilities to
the utmost. Whilst individual initiative
and performance are recognized, all
are identified with the success of
the company and a winning attitude
prevails.
Our style of management will
encourage employee involvement and
a positive work attitude: we will utilize
our resources effectively to maintain a
superior quality of service by following
a policy of continuous improvement,
openness to change, search for better
ways, speed of action, hard work and
an aggressive determination to get
things done, which will characterise
our attitude towards every aspect of
our work.
Our principals / suppliers are
essential to our business: we will
pursue a confident and mutually
beneficial relationship. We will deal
fairly and impartially and provide
principals, suppliers and their
accredited agents with timely advice
of future requirements and quality
expectations.
Our company is a responsible member
of our community: we believe that our
success and growth will contribute
to the quality of life of our people
and towards this end we will work in
harmony with nature and would seek
to eliminate all forms of pollution.
2 United Motors Lanka PLC | Annual Report 2013/14
Operational highlights
No. of employees
Turnover per employee
(Rs. ‘000)
Company
Group
Company
Group
20,000
1,200
1,000
15,000
800
10,000
600
400
5,000
200
2009/10 2010/11 2011/12 2012/13 2013/14
2009/10 2010/11 2011/12 2012/13 2013/14
Shareholder funds
8.1
Bn
The group has continued to
grow over the years and today
has a strong balance sheet
PBT per employee
Value added per employee
(Rs. ‘000)
Company
Group
(Rs. ‘000)
Company
5,000
10,000
4,000
8,000
3,000
6,000
2,000
4,000
1,000
2,000
Group
2009/10 2010/11 2011/12 2012/13 2013/14
2009/10 2010/11 2011/12 2012/13 2013/14
Inventory turnover
Debtors collection period
(Times)
(Days)
Company
Group
Company
Group
80
70
60
50
40
30
20
10
6
5
4
3
2
1
2009/10 2010/11 2011/12 2012/13 2013/14
2009/10 2010/11 2011/12 2012/13 2013/14
United Motors Lanka PLC | Annual Report 2013/14 3
Financial highlights
Company
Turnover
Profit after tax
(Rs. Mn)
(Rs. Mn)
Group
Company
25,000
2,500
20,000
2,000
15,000
1,500
10,000
1,000
5,000
500
2009/10 2010/11 2011/12 2012/13 2013/14
Group
2009/10 2010/11 2011/12 2012/13 2013/14
13.9
Group Turnover
Bn
Total assets
(Rs. Mn)
Company
Group
12,000
10,000
8,000
6,000
4,000
2,000
2009/10 2010/11 2011/12 2012/13 2013/14
4 United Motors Lanka PLC | Annual Report 2013/14
Our marketing expertise, underpinned
by world-class brands in vehicles and
automotive products generates customer
value by delivering quality at every level.
“
We aim to continuously improve the quality
and appeal of our brand portfolio.
Group
”
Company
2013/2014
2012/2013
Change %
2013/2014
2012/2013
Change %
13,890,397
2,180,271
17,776,580
2,713,039
(21.86)
(19.64)
7,041,192
1,984,058
8,774,242
2,443,045
(19.75)
(18.79)
1,607,721
2,012,914
(20.13)
1,482,765
1,886,762
(21.41)
872,920
3,969,658
6,895,105
2,546,658
218,206
8,097,177
224,820
3,671,577
6,433,543
2,535,611
194,002
7,370,627
288.27
8.12
7.17
0.44
12.48
9.86
753,442
3,950,965
3,782,725
919,547
166,609
6,647,534
156,839
3,690,547
3,496,209
1,001,371
135,074
6,050,311
380.39
7.06
8.19
(8.17)
23.35
9.87
18.03
15.70
19.82
1.84
16.77
2.71
1.12
25.26
15.26
27.22
3.32
14.98
2.54
1.19
(28.62)
2.88
(27.18)
(44.58)
11.95
6.69
(5.88)
51.30
28.18
22.31
1.70
3.63
4.11
1.79
131.64
27.84
31.18
3.12
1.50
3.49
1.96
(61.03)
1.22
(28.45)
(45.51)
142.00
17.77
(8.67)
67,267
23.90
13.00
54.39
120.37
67,267
29.92
9.00
30.08
109.57
(20.12)
44.44
80.82
9.86
67,267
22.04
13.00
10.57
58.98
98.82
67,267
28.05
9.00
9.38
32.09
89.94
(21.43)
44.44
12.74
83.80
9.87
-
-
-
123.00
5.58
96.00
3.42
28.13
63.06
-
-
-
8,273,841
130.00
6,457,632
108.00
28.13
20.37
Profitability (Rs.’000)
Turnover
Profit before tax
Profit attributable to equity
holders of the company
Financial position (Rs.’000)
Investment in PPE and
intangible assets
Non-current assets
Current assets
Current liabilities
Non-current liabilities
Shareholders’ funds
Ratios
Interest cover (times)
Profit before tax to revenue (%)
Return on capital employed (%)
Dividend cover (times)
Borrowings to equity (%)
Current ratio
Quick asset ratio
Share performance
Number of shares (‘000)
Earnings per share (Rs.)
Dividend per share (Rs.)
Dividend yield (%)
Dividend payout (%)
Net assets per share (Rs.)
Market value per share
as at 31 March (Rs.)
Price earning ratio
Market capitalization as at
31 March (Rs.’000)
Highest recorded share price (Rs.)
United Motors Lanka PLC | Annual Report 2013/14 5
16th May 2013
We seek to make a
positive contribution
to social and economic
development wherever
we operate.
A workshop was opened in Kandy
to cater to UML, UEL and OMCL
brands.
10th September 2013
Launch of Fuso Heavy
Trucks
UML launched the all new range
of Fuso heavy trucks at BMICH
in front of a large gathering
consisting of customers and
media.
Events of the
year
2013/14
November 2013
The company participated
at the in the Annual Report
Competition - Motor sector
conducted by The Institute
of Chartered Accountants
of Sri Lanka, and won gold
award for the 6th year in
succession.
6th-8th September 2013
Colombo Motorshow
The company participated at the
Colombo Motor Show organized by
Asia Exhibition held at BMICH. The
Mitsubishi, Perodua, Zotye, JMC and
DFSK range of vehicles were on display.
6 United Motors Lanka PLC | Annual Report 2013/14
February 2014
The company added the
Mitsubishi Attrage, the
latest sedan by Mitsubishi
Motors Corporation to its
portfolio.
6th-7th March 2014
Mitsubishi Vehicle display at
Crescat jointly with Orient
Finance PLC.
November 2013
United Motors was ranked
among the top 25 companies
in Sri Lanka across all
industries by Business Today,
in 2013.
20th-21st March 2014
3rd -6th December 2013
Valvoline Asia Distributor
Summit
The legendary brand MG was
launched by Unimo Enterprises
Ltd.
The summit commenced by
recognizing the 60 top local
Valvoline dealers and the top
Valvoline International distributors
at a presentation at the Cinnamon
Grand Hotel, followed by
cocktails.
3rd March 2014
Unimo Enterprises Ltd
opens its assembly
plant in Ranala.
United Motors Lanka PLC | Annual Report 2013/14 7
Milestones
1945
Incorporation of United Motors Limited
as a Private Limited Liability Company.
1972
Vested in the Government on 8 March.
Began operating as the Government
Owned Business Undertaking of United
Motors.
1985
Entered into a distributor agreement with
Mitsubishi Motors Corporation (MMC).
1989
Selected as the first Government venture
for peoplisation with the intention
of encouraging a widespread share
ownership among the people.
May
United Motors Lanka Limited was
incorporated as a Public Limited Liability
Company with an authorised share
capital (now referred to as stated capital)
of Rs. 100,000,000/-.
June
MMC agrees to purchase 500,000 shares
at par, prior to the sale of shares to the
public.
June
Announcement of the Public Share
Issue. Out of 10,000,000 shares offered,
500,000 (5%) shares were reserved for
employees.
1990
October
Distribution of shares to employees.
1993
Employees’ Share Trust Scheme – an
incentive scheme linked to employee
share participation was inaugurated.
Capital increased by Rs. 10 Mn, to
allocate shares to employees.
1994
Incorporation of a subsidiary - UML
Property Developments Ltd., for the
construction of a warehouse complex on
a five acre block at Orugodawatte.
1995
September
Celebrated 50 years of excellence.
1996
September
The new showroom was opened at the
Hyde Park Corner Head Office premises.
1997
November
Kancil cars - made in Malaysia by
Perodua were introduced.
1998
January
Montero, the ‘King of the Road’ was
launched.
1999
July
The Orugodawatte Complex was opened.
December
Branch office opened in Kurunegala.
2000
October
Launch of website: http://www.
unitedmotors.lk
2002
October
Acquisition of Unimo Enterprises Limited
November
Opening of a new showroom at Lipton
Circus, Colombo 2.
2003
April
UML acquired 50% interest in TVS Lanka
(Pvt) Ltd.
June
Incorporation of TVS Autoparts (Pvt) Ltd.
(a subsidiary of TVS Lanka (Pvt) Ltd.)
2004
September
The Yokohama launch.
2005
May
The Mitsubishi Lancer Evolution IX - heir
to a winning tradition was launched in
Sri Lanka.
2006
January
Unimo Enterprises Ltd launched a range
of Chinese vehicles.
8 United Motors Lanka PLC | Annual Report 2013/14
November
Launch of the new Mitsubishi Sportero.
December
Launch of ‘Adyapana Athwela’
scholarship scheme for children of UMLL
staff.
2007
January
Introduced ‘Kenari’ from the Perodua
range.
February
Launch of the 2007 Mitsubishi Montero.
March
TVS Lanka (Pvt) Ltd. signed a distributor
agreement with Bharat Petroleum
Corporation of India.
June
Unimo Enterprises Ltd. added the JMC
cab to its vehicle portfolio.
August
The Company was re-registered as
United Motors Lanka PLC.
September
Opened a branch for spare part sales in
Kandy.
November
The Company added the Mitsubishi L200
single cab to its portfolio.
December
Unimo Enterprises Ltd added Zotye
Nomad to its vehicle portfolio.
2008
February
Mitsubishi Lancer Evolution X – the heir
to a winning tradition was introduced in
Sri Lanka.
March
Incorporation of TVS Automotives (Pvt)
Ltd as a fully owned subsidiary of TVS
Lanka (Pvt) Ltd.
May
First branch with comprehensive
facilities under one roof was opened in
Anuradhapura.
August
Unimo Enterprises Ltd added the
Perodua Viva to its product portfolio.
2009
January
Branch with sales and workshop facilities
opened in Kandy.
June
UML’s employee Ms. Zeeniya Rasheed,
General Manager (Marketing) elected
Chairperson of the Ceylon Motor Traders
Association.
November
TVS Lanka (Pvt) Ltd., launched the TVS
King three wheeler in Sri Lanka.
December
Branch with comprehensive facilities
under one roof opened in Matara. Unimo
Enterprises Ltd opened a local assembly
facility within the Orugodawatte
Workshop Complex to assemble the
Zotye Nomad SUV.
2010
May
The Company added the Mitsubishi
Outlander with the new face lift to its
portfolio.
December
The Company increased the number of
shares by way of a share split on the
basis of two new ordinary shares for
every existing issued ordinary share.
2011
January
The Company added the new Mitsubishi
Montero Sport to its portfolio.
February
OMCL added the DFSK Mini truck brand
to its portfolio.
June
The company added the Mitsubishi ASX
to its portfolio.
A sales showroom was opened in Badulla
for UEL brands.
September
July
TVS Lanka launched “WEGO” to the local
market. This was the latest addition to
the TVS scooter range. The uniqueness
of this scooter is it’s body balance
technology where the gravity of the bike
is right at the centre which gives a better
balance for the rider. The all steel body
comes with unmatched convenience and
safety options.
August
The company added Mitsubishi
Outlander 2.0L to its portfolio.
October
Unimo Enterprises Limited together with
Orient Motor Company opened its first
branch in Kelaniya.
December
The company was awarded a citation
for order intake development from
Mitsubishi Fuso Truck and Bus
Corporation Japan for the FUSO brand.
2012
January
A branch with sales and workshop
facilities opened in Jaffna to cater to
UML, UEL and OMCL brands.
The group achieved its highest ever profit
in the financial year.
2013
United Motors Lanka PLC earned its
highest ever profit after tax.
February
The Company divested the 100%
ownership in the subsidiary, Orient
Financial Services Corporation Ltd.
LMD 100 in its listing of public
companies for the financial year
2011/12 rated United Motors Lanka PLC
at number 29, up from number 38 in the
previous year.
March
The Company added the Mitsubishi
Delica D5 to its portfolio.
Business Today listed United Motors
Lanka PLC as number 20 in its Business
Today Top 25 for 2011/12.
The Company added the new Mitsubishi
Canter 14 ft (4WD), 10 ft and the 22 ft
FM trucks to its range of products.
May
May
A branch was opened in Ratnapura with
sales and workshop facilities to cater to
UML, UEL and OMCL brands.
June
A workshop was opened in Kandy to
cater to UML, UEL and OMCL brands.
A sales showroom was opened in
Vauxhall Street, Colombo 2 for the new
Fuso Business.
September
The company added heavy duty Fuso
trucks to its portfolio.
October
United Motors was ranked
amongst the top 100
corporates in Sri Lanka
across all industries in
2012/13 by LMD.
November
United Motors was
ranked among the top 25
companies in Sri Lanka
across all industries by
Business Today, in 2012/13.
2014
January
The company added the
Mitsubishi Outlander 2014
to its portfolio.
February
The company added the
Mitsubishi Attrage the latest
sedan by Mitsubishi Motors
Corporation to its portfolio.
March
Unimo Enterprises Ltd
opens its assembly plant in
Ranala.
March
The legendary brand
MG launched by Unimo
Enterprises Ltd.
A sales showroom was opened in
Ratnapura for UEL brands.
United Motors Lanka PLC | Annual Report 2013/14 9
Chairman’s review
CONSIDERING THE CONTRACTION IN THE INDUSTRY, OUR PERFORMANCE CAN BE CONSIDERED
CREDITABLE, AND I AM PLEASED TO ANNOUNCE A THIRD AND FINAL DIVIDEND OF RS. 6.00
PER SHARE.
Sunil G. Wijesinha
Chairman
10 United Motors Lanka PLC | Annual Report 2013/14
Dear Shareholders,
I am pleased to report that the UML
Group made a profit after tax of
Rs 1.6 billion during a very
challenging year. This is a decline of
20% compared to the previous year.
Group revenue was Rs 13.9 billion,
compared to LKR 17.8 billion in the
previous year, which is a 22% decline.
This performance should be viewed
against the backdrop of the industry
downturn following the boom period
of 2011/12, during which we enjoyed
a low tax regime that significantly
benefited the vehicle trade.
Considering the industry contraction,
this performance can be considered
creditable, and I am pleased to
announce a third and final dividend of
Rs 6.00 per share.
such as the political crisis in Ukraine,
further aggravated the situation.
The US economy continued to be
the best performer among the
advanced economies. There is however
uncertainty, as to how the economy
will manage as quantitative easing
ends by mid-2014, and the volatility
in financial markets that may ensue.
Recent US employment data have
been very encouraging, showing signs
of a sustained recovery in economic
activity in the US, which was further
affirmed by the move away from the
ultra-low interest rate regime. The US
Federal Reserve seems confident of a
sustainable recovery. These indications
of a US recovery is significant as the
impetus for stronger global growth
will come from the US economy.
THE US ECONOMY CONTINUED TO BE THE BEST PERFORMER
AMONG THE ADVANCED ECONOMIES. THERE IS HOWEVER
UNCERTAINTY AS TO HOW THE ECONOMY WILL MANAGE AS
QUANTITATIVE EASING ENDS BY MID-2014
I take this opportunity to take you
through the performance of the
global and Sri Lankan economic
environment, to the extent that it has
a bearing on the demand for personal
and commercial vehicles in general,
and what we have done to make
your company more resilient and
sustainable.
The World Economy
The global economy in 2013/14
continued to feel the lingering effects
of the unprecedented global economic
crisis 2008/2009. External shocks
Improved household finances and
improved corporate sector confidence
will probably spur economic activity
in the US, which will increase demand
for Sri Lankan exports as well, as the
US is Sri Lanka’s largest single trading
partner.
The recovery in the Eurozone remained
weak, although the risks of a Eurozone
break up have diminished significantly.
Business confidence indicators in
the European Union suggest that
activities are close to stabilizing in the
peripheral economies and recovery in
Our Chairman launching the new
Daimler Fuso in Sri Lanka, this
will significantly add value to our
product portfolio.
the core economies. The public debt
level and the fragmented financial
system are worrying issues in the EU.
Overall, however, fundamentals of the
Eurozone economy remain weak and
will not generate robust demand for
Sri Lankan exports in the short term.
High unemployment levels – especially
youth unemployment – risks a ‘lost
decade’ in the EU. Future prosperity of
the region is threatened in the coming
decades due to a large numbers
of unemployed or underemployed
youth, and will have knock-on effects
on productivity, wages, and future
earnings – which in turn impacts how
rich the EU will be.
Significant volatility was noticed in
emerging markets in 2013, mainly
in mid to late 2013, triggered by the
announcement of the quantitative
easing by the US Federal Reserve.
Already significant sales of emerging
market assets by global investors have
been noted. This volatility is likely to
continue to a certain degree in 2014
as well.
United Motors Lanka PLC | Annual Report 2013/14 11
Chairman’s review contd.
The strategic direction we embarked on a few
years ago, to diversify into vehicles from different
countries of origin, and to reduce dependency on
Japanese vehicles, has paid off
The financial markets in China have
faced significant stress. India’s growth
and investment has faltered whilst
commodity dependent economies
have seen weakening currencies,
fiscal positions and growth. China’s
growth moderated in 2013 due to
the rebalancing policy of focusing
more on the domestic market. China
is gradually shifting from the exportoriented and investment dominated
economic model, to a somewhat
domestic-oriented and consumption
dominated economic model. China’s
7.6% GDP growth in 2013 - although
less than the 9.3% growth recorded in
2011 - remains high by international
standards. China is expected to
maintain this growth rate for 2014
with 0.3% points lower than 2013.
India, the other major market in
Asia has shown much slower growth
during 2012 and 2013, at 3.2% and
3.8%, respectively. The low business
confidence has resulted from policy
uncertainty, double digit inflation
caused mainly by deregulating
administrative prices and depreciating
currency, rising current account
deficits, etc. The political uncertainty
and lack of any bold moves on
economic reforms, owing to the
looming elections, was also a damper
on growth. This is expected to change
by late 2014, with the new pro-market
oriented Modi-led BJP government in
power.
The Sri Lankan Economy
The macroeconomic fundamentals in
the Sri Lankan economy have been
benign and under control in 2013.
Inflation has remained below 8% for
much of 2013, and with it, interest
rates. Yet, the low interest rates since
the second half of 2013 have not
translated into a substantial increase
in economic activity. Whilst GDP
growth was an elevated 7.8% in the
3rd quarter of 2013 (largely due to
base effects), there has not been a
notable manifestation of this in terms
of economic activity. Other indicators
of economic activity, such as demand
for imports, demand for credit, core
inflation, all remained low through the
second half of 2013. Private sector
credit demand has been lackluster,
despite sufficient liquidity in the Sri
Lankan financial system. With rates at
record lows and financial institutions
keen to lend, it is likely that lending
to the private sector will pick up by
mid-2014. As the year progresses, one
would expect the low interest rates
to eventually trigger higher economic
activity which would generate demand
for goods and services. It is likely that
sectors such as trading would be the
first to respond.
Some experts argue that economic
activity has not fully recovered
from the adjustment and tightening
measures adopted in 2012, across a
range of areas, including utility prices,
exchange rates, and imports. If growth
gathers pace by mid to late 2014, it
would also create greater demand
for imports and credit, which may
perhaps lead to a slight depreciation
of the exchange rate and authorities
may be compelled to edge interest
rates slightly upwards. Sectors like
construction and trading will be some
of the first to pick up and will continue
to do well, like in recent quarters.
Factors that could drive Sri Lankan
exports higher include,
A sustained growth in the US
economy and a rise in household
incomes
No further aggravation of
Eurozone troubles
Indian economic growth picking
up, following pro-growth reforms
and bringing back postponed
growth-promoting legislature
(e.g.. FDI-related) following the
take-over of Modi as Premier.
12 United Motors Lanka PLC | Annual Report 2013/14
A SL-China FTA that respects
countries’ asymmetry and
provides market access to
products Sri Lanka has an
advantage in.
Another important facet to look out
for in 2014,is the sharp contraction in
agricultural output, especially paddy
production, due to the drought. This
would impact agricultural incomes
and disposable incomes of those
in the agricultural sector – not just
farmers but also traders – and may
impact new vehicle sales.
Industry Performance
Sales of new passenger cars including
Sports Utility Vehicles (SUVs) showed
a decline over the past two years,
declining by 22% over the previous
year. Similarly the sales of three
wheelers and two wheelers also
declined during the period under
review at 15% and 12% respectively.
With predictions of increased credit
growth in the latter part of 2014,
we hope this declining trend will be
reversed.
Company performance
In spite of the significant decline in
the industry, the mitigating strategies
the company had put in place in the
past, paid off. The strategic direction
we embarked on a few years ago, to
diversify into other types of vehicles
from different countries of origin, and
to reduce dependency on Japanese
vehicles, has paid off as a wise and
sustainable choice. The decision to
assemble vehicles here, has already
been operationalised. Expansion of
our network and the enhancement of
the capability for servicing vehicles,
are bringing in good results.
In some cases, we have worked
closely with foreign manufacturers to
develop vehicles that meet consumer
preferences and road conditions in
Sri Lanka. This has been done to
enable Sri Lankan entrepreneurs to
acquire useful vehicles, so that they
may progress to their next level of
development. These vehicles have
been well received by small and
medium scale entrepreneurs.
In line with our overall growth
strategy, we focused on two important
aspects - customer orientation and
employee involvement. To enhance the
customer orientation of the company,
we embarked on several initiatives,
including training of employees to
deliver a level of customer satisfaction
that goes beyond expectations. We
developed customer service standards
and produced a customer service
guide to benchmark and monitor
service quality. We improved customer
facilities in our workshops, even
providing iPads for customers to use
during their waiting period of vehicle
servicing. Service centre layouts were
organised by positioning customer
waiting rooms so that customers
could observe their vehicle servicing
progress. We believe we now provide
the best customer facilities in the
vehicle retail industry.
Our focus on employees is driven by
the belief that employee satisfaction
leads to higher quality of service and
higher productivity, and that we need
to tap the knowledge and creativity
of our entire workforce. We have
gone beyond the norm in creating a
participatory work environment by
introducing team based approaches,
such as Continuous Improvement
Teams, Quality Circles and Japanese
style Kaizen suggestions. During the
year, we realigned and fine-tuned
our business processes to create a
customer centric business, which is
facilitated through our employees. I
believe our overall business growth
strategy, supported by an employee
and customer focus, will result in
long term sustainable business
relationships.
During the current year, we also
focused on improving the performance
of some of our under performing
subsidiaries. A comprehensive
analysis was conducted on these
business operations, together with
market assessments, to develop
recovery plans, which have been
initiated. We are already experiencing
positive outcomes from these
initiatives and we will monitor and
review the performance of these
companies closely.
Our joint venture with the TVS Group
of India continued successfully during
the year. However, I believe there
is further potential to exploit this
relationship more productively. The
TVS Group is well-known in India and
globally. TV Sundram Iyengar and
Sons was established in 1911 and is a
highly respected company. TVS Motor
Company is one of the first companies
outside Japan to have won the
prestigious Japanese Deming Quality
Award for excellence in Total Quality
Management. This is indicative of the
company’s excellent manufacturing
practices and quality standards.
Several companies in the TVS Group
have also won similar prestigious
awards. Therefore, in future, we will be
looking into further opportunities for
mutually beneficial collaboration.
We congratulate the Government on
its initiative to upgrade infrastructure
facilities in the country. The
development of the road network will
facilitate trade amongst regions and
will open out areas which were not
easily accessible. These initiatives will
surely spur economic growth outside
the western province. At the same time,
we urge the Government to consult
the industry before making sudden
and drastic changes to duty structures
and implementing other regulations
that negate initiatives we have put in
place after years of effort. While we
understand the Government’s position,
it may be mutually beneficial to engage
in discussions with the industry before
such decisions are made.
The transport and logistics sector will
be one of the biggest beneficiaries of
the hub strategy of the Government.
Many of the hubs pertain to services
that will require transport and logistics,
and we look forward to providing these
required transport solutions.
As part of our contribution towards
conserving the environment, we have
introduced eco-friendly small vehicles
to the local market. Both the Mirage
and the Attrage from MMC, are
environmentally friendly vehicles with
lower emissions and fuel consumption,
and have been highly successful. We
intend expanding our eco-friendly line
of vehicles in the new financial year as
well.
The transport and logistics
sector will be one of the biggest
beneficiaries of the hub strategy of
the government.
In the new financial year, we will
continue to focus on improving
our customer services standards
to drive our growth strategy, and I
am confident that the Sri Lankan
public will appreciate the difference
in our service standards. On that
note, I thank all our customers for
their patronage and I hope we can
build long and mutually beneficial
relationships. I thank the management
and staff, led by our Chief Executive
Officer, Mr. Chanaka Yatawara, for a
commendable effort during a difficult
time, and I thank my colleagues
on the Board for the support they
extended to me. My thanks go out to
the previous Chairman, Mr. Ranjith
Fernando, who contributed immensely
to the company’s strategic growth and
to Board members, Mr. S Nagendra
and Mr. T. M. R. B. Tennekoon, who
retired at the end of the last financial
year, for their contributions over
the years. I thank our joint venture
partners, TVS and Sons and TVS
Motors Ltd for their support.
Sunil G. Wijesinha
Chairman
29 May 2014
United Motors Lanka PLC | Annual Report 2013/14 13
Chief executive officer’s
review of operations
FUNDAMENTAL TO EVERYTHING WE DO IS A CONSTANT FOCUS ON ACHIEVING
INCREASINGLY HIGHER LEVELS OF REVENUE AND PROFITS, AND ON IMPROVED OPERATIONAL AND
ENVIRONMENTAL PERFORMANCE.
C. Yatawara
Chief Executive Officer
14 United Motors Lanka PLC | Annual Report 2013/14
Brand new vehicles registered
(Units)
SINCE THE INDUSTRY HIGHPOINT THREE YEARS
AGO WHEN 73,000 BRAND NEW VEHICLES WERE
SOLD, SALES OF VEHICLES IN THE CURRENT
YEAR FELL TO 36,000 VEHICLES.
The auto industry continued to shrink
during the current financial year
eroding bottom lines of the vehicle
retail industry and triggering concerns
about sustaining growth under the
current circumstances. Nevertheless, I
am happy to report that your company
demonstrated a relatively strong
performance in the face of market
challenges, and also made headway in
new growth segments that presented
opportunities.
Since the industry high point three
years ago in 2011/12, when 73,566
brand new vehicles were sold, the
market for new vehicles has gone
into negative growth, with sales
dropping to 48,888 units in 2012/13,
and continuing to slide to 36,064
units in the current financial year.
This market plunge, which was
caused by the combined impact of
sharp increases in taxes, the drop
in demand for duty free permit
imports and lower economic activity
in the country, especially related to
the commercial vehicle sector, has
continued to disrupt the market and
hurt industry bottom-lines. During the
current financial year, taxes that were
2011/12
2012/13
2013/14
80,000
70,000
60,000
50,000
40,000
30,000
20,000
10,000
2011/12
increased in 2012/13 for passenger
vehicles continued, and taxes were
even increased on commercial
vehicles, which were previously not
subject to regular tax increases.
The unpredictable tax burden on
new vehicles has seriously deflated
demand for new vehicles. The permit
market, which was created with tax
concessions to senior state employees
to enable them to import vehicles, had
created an alternative market for new
vehicles sales. However, this segment
is now fast approaching saturation
point and despite indications of
expansion of permits to a wider group
of state employees, this has not
materialised. Therefore, the domestic
market for new vehicles is contracting
on both the concessionary and nonconcessionary ends. We believe this
market contraction will continue into
the new financial year, to stabilise
at a much lower annual absorption
capacity in the range of 24,000 units
in 2014/15.
2012/13
2013/14
As a result of the shrinking market for
new four wheel vehicles, the number
of vehicles sold by the company
reduced from 3,113 units in 2012/13
to 1,833 units in the current year,
while group vehicle sales excluding
two and three wheel sales numbered
4,401 this year, down from 7,293 in
the previous year. Lower volumes led
to Group turnover declining by 22% to
Rs 13.9 billion. However, the Company
made a net profit of Rs 1.5 billion
during the financial year while Group
profits amounted to Rs 1.6 billion.
While the company profit levels dipped
by 21% against the Rs 1.9 billion
profit in 2012/13, it is noteworthy
that total market contraction during
the year was 30%.
Given the unpredictability and
limited growth opportunities within
the market for new vehicles, United
Motors adopted a two pronged
strategy of targeting new and
emerging market segments, and the
25,000
Our group sold in excess of
25,000 vehicles in a very
challenging year.
Vehicles
United Motors Lanka PLC | Annual Report 2013/14 15
Chief executive officer’s review of operations contd.
WE ENTERED THE EMERGING ECO-FRIENDLY AUTOMOBILE MARKET WITH TWO MODELS FROM
MITSUBUSHI-THE MIRAGE AND THE ATTRAGE
Fixed assets
753
Mn
Our investment in ixed assets
included investments in land,
buildings, plant and equipment.
growing market for after sales services
for existing vehicles. United Motors
has by now captured a significant
share of the after sales business in
the country for vehicles marketed
by the company and the group, we
operate eleven branches and other
outlets together with eight workshops
in strategic locations across the
island. Many of these branches and
workshops were recently upgraded.
These after sales services have opened
up a growing stream of revenue for
the company by accommodating
4,000 more vehicles per annum in our
main workshop and branches, and by
also being able to attract vehicles in
the outstations to UML branches.
We entered the emerging eco friendly
automobile market. In the previous
financial year we introduced the eco
friendly Mirage from Mitsubishi, to the
local market which had much lower
emission levels and fuel consumption
than traditional petrol vehicles. During
the current year we introduced the
Attrage, a sedan from Mitsubishi,
which is another eco friendly car,
providing local consumers with two
cost effective and environmentally
friendly vehicle options. We hope to
expand our environmentally friendly
line of vehicles further in the new
financial year, providing better value
for consumers and wider society. In
addition, we entered the heavy truck
segment, and large car segment,
expanding our range of vehicles even
further.
Our decision to assemble vehicles
within the country has also helped
reduce the impact of unpredictability
of import taxes on the cost of
vehicles, although the tax differential
itself between assembled vehicles
and imports of completely built
vehicles has reduced, our new facility
for assembly will accommodate
up to three brands for assembly,
in the new financial year. Our
market development initiatives have
been explained further under the
performance of our subsidiaries and
our joint venture companies. As an
alternative source of income, we have
also built a stock portfolio of blue chip
shares that provide optimum riskreturn outcomes. Another significant
investment during the current year
was the Rs 443 million purchase of
a 10 acre property in Ratmalana, for
vehicle storage, stores for tyres and
lubricants and for a new workshop
facility. We have ensured that our
growth strategy is supported by
internal capacity building initiatives
targeting both human development
and other required investments.
During the current year, we invested in
excess of Rs 100 million in expanding
workshop facilities to capture a larger
share of the after sales market.
This was backed up by extensive
investments in training and creating
a productive and a motivating work
environment. I believe our efforts
in focusing on our customers is
beginning to show tangible benefits as
our customer satisfaction indices have
improved to over 90% as per third
party surveys. We will continue to
16 United Motors Lanka PLC | Annual Report 2013/14
The long-term investments we are
making will help contribute to the
nation’s economy, while creating
sustained value for our shareholders,
employees, business partners and the
communities where we operate.
focus on building a customer centric
culture and on streamlining our
processes for leaner operations, in the
new financial year.
As an automobile company we take
our responsibility to create a cleaner
environment very seriously. This year
we will take further steps to contribute
to a greener environment through
more innovative initiatives.
United Motors Lanka PLC (UML)
The parent company of the United
Motors Group, UML, saw turnover
reduce to Rs 7.0 billion in the current
financial year, from Rs 8.8 billion
in the financial year 2012/13, and
its bottom-line fell from Rs 1.9
billion to Rs 1.5 billion. However,
a closer examination of the
company’s operations show a marked
improvement in the business of
spare parts, workshop services and
lubricants, compared to the previous
financial year. This is a positive
indication of the expansion of our
after sales services during the current
year as a strategy to maximize on
income generation opportunities.
Operating profits from the spare
parts business increased by 87% and
profitability of workshop services saw
a 44% increase. Profits from the sale
of lubricants increased by 21% during
the year. This growth in after sales
has been driven by the expansion of
our branch and workshop network.
During the current year we expanded
capacity at four service centres in
Anuradhapura, Kandy, Kurunegala and
Matara. All our branches, except for
one, can now accommodate accident
repairs, giving customers the facilities
that they earlier enjoyed only at our
Orugodawatte workshop. The service
centre in Ratnapura is in the process
of being upgraded and expanded,
which will add capacity in the new
financial year.
Sales of vehicles however, continued
to decline. Sales of passenger vehicles
dropped by a massive 29% and
sales of trucks fell by 21%. Volumes
of permit based sales fell by 53%
as mentioned earlier, due to the
saturation of permits. Even though
overall volumes have dropped, it is
encouraging to note that market
share was maintained. Another new
introduction during the year was a line
of heavy trucks from Daimler Fuso.
Previously United Motors was not a
contender in this category of heavy
vehicles. Therefore, in September
2013, we introduced a range of 9MT,
12MT and 16MT Fuso trucks from
India, that will compete in a significant
sized market for the first time.
The United Motors Group continued
to own 9% of the vehicle market in
the country. In the Japanese vehicle
segment, Mitsubishi retained its 41%
share.
Unimo Enterprises Limited (UEL)
Our fully owned subsidiary Unimo,
which is engaged in the local assembly
of vehicles, retailing a line of Chinese
vehicles, Yokohama tyres and the small
car brand Perodua, faced a number
of setbacks during the year due to
the prevailing high tax regime. Unimo
recorded a net profit after tax of Rs
148 million during the current financial
year compared to Rs 321 million in the
previous year. Overall, industry sales
volumes of new passenger cars saw
a sharp decline over the past three
years, with sales declining from 27,868
units in 2011/12, to 10,959 units in
Presentation of scholarships and school requirements to students of
Wijayaba Vidyalaya in Colombo 14.
2012/13 and falling further to 7,657
units in the current financial year. Sales
of the Perodua, which was the most
profitable segment for this company
previously, dropped from 2,220 cars
in 2012/13 to 1,030 cars in 2013/14.
While, import charges on assembled
vehicles were raised in 2013 cutting
down the cost advantage of assembly,
however there is still a cost advantage.
Given the unpredictability of taxation
on imported vehicles and the
positive response to our domestically
assembled SUV, we plan to expand
our locally assembled line of vehicles
further. During the new financial year,
the Sri Lankan public can look forward
to a passenger car and a van, with a 7
person capacity that will meet family
budgets and family requirements of
space.
UEL’s tyre retailing venture meanwhile,
saw a 42% rise in profitability
despite the intense competition in
the tyre market, due to strengthened
collections and marketing efforts
targeting institutional clients. As
a result, this business which was
previously ailing, has shown promise
and recovery.
Responding to a gap in our vehicle
portfolio, UEL introduced MG (Morris
Garage) cars to the local market
during the current year. This reputed
British brand with a strong heritage,
which was bought over by SAIC
Corporation China, meets the need for
a larger car within the United Motors
line up of vehicles and comes with a
strong value proposition at a price of
Rs 5.5 million, for a fully loaded 1.8 ltr
turbo, sedan with leather interior. The
automatic version of the MG car will
enter the country in 2014.
Orient Motor Company Limited
(OMCL)
Our subsidiary Orient Motor Company
was the most severely affected by tax
changes during the year. The company
had introduced the DFSK, a small
Chinese truck that was specifically
designed for the Sri Lankan terrain,
supported by higher load bearing
capacity and more sophisticated
features than the competition, but at
United Motors Lanka PLC | Annual Report 2013/14 17
Chief executive officer’s review of operations contd.
DFSK Unimo Lokka
10
%
DFSK Unimo Lokka captured 10%
of the market within 20 months of
its market entry
reduce value additions to Sri Lankan
consumer.
Despite our focused efforts, our three
wheeler market share decreased from
3.7% to 3.3%, which is a minute
decrease. Currently the company
also controls an 11% share of the
two wheeler business. As the three
wheelers are now showing progress,
we anticipate continued gains in this
market in the new financial year.
We are ambitious of our growth
projections in this sector and if we are
able to achieve these numbers through
the strategies and plans we have put
forth, the company should show much
improvement towards the 2nd quarter
of the new financial year.
TVS Lanka (Pvt) Ltd (TVSL)
TVS Automotives (Pvt) Ltd
Our joint venture TVSL went through
significant changes during the year,
including a re-structuring process,
to streamline operations, cut costs
and improve productivity and improve
brand confidence in both its two wheel
and three wheel segments.
I am happy to announce that TVS
Automotives, which is a subsidiary
of TVS Lanka, involved in retailing
lubricants and tyres, has a positive
story of recovery in the current
financial year. The company made
a strong return from being a loss
maker, due to an organisational
restructuring plan that cut costs and
streamlined operations. Together with
aggressive marketing, the flatter and
leaner company has returned to a
more healthy financial position, and
we expect to sustain profitability in
the next financial year as well.The
company’s lubricant business and
tyres are both getting stronger brand
acceptance, due to the quality and
reliability of agents. The lubricant
business competes with 13 other
players for a share of a 56 million litre
business, of which the company had
a 3% market share, at the end of the
United Motors was ranked among the top 25 companies in Sri Lanka
across all industries by Business Today, in 2013.
an equal price. The DFSK captured
10% of the small truck market within
just 20 months of market entry,
despite being a new and unknown
brand competing against established
brands.
However, in November 2013, import
taxes on the DFSK was more than
tripled from 38% to 125%. This
massive tax increase was attributed
to its capability to carry more weight.
The disproportionate tax structure
made the DFSK uncompetitive against
competitor brands that continued
to enjoy a 38% tax threshold. As
a result of the company lobbying,
the tax on the DFSK was reduced to
55% after four months. However, the
higher tax and the market disruption
resulted in the company losing
market share and a significant drop
in volumes. Therefore, the company is
now considering importing a smaller
truck from DFSK with lower features,
to come within the standard 38%
tax threshold, although this would
TVS Lanka continued to face
difficulties in expanding market
share in the three wheeler market,
which is dominated by a single Indian
player with 35 years of first mover
advantage. The two wheel market is
also dominated by larger players that
have advantages on pricing and wider
range of models, even though TVSL
remains a strong competitor in the
scooter and moped sector. Therefore,
during the current year, we focused
on identifying bottlenecks to market
expansion in the three wheeler market
and developing practical solutions.
18 United Motors Lanka PLC | Annual Report 2013/14
We are ambitious of our growth projections in the
two and three wheeler sectors and if we are able
to achieve these projected numbers through the
strategies and plans we have put forth, TVS Lanka
should show much improvement towards the 2nd
quarter of the new financial year.
current year. Due to the challenges
involved in collecting from dealers
in the tyre business, the strategy for
higher profits has been to increase
margins and reduce volumes. This
seems to be a more sustainable model
under current market conditions.
who resigned from the company on
10 June 2013 and our appreciation
is also due to Mr. T. M. R. M. B.
Tennekoon and Mr. S. Nagendra,
former Directors who did not seek
re-election at the AGM held on
05 July 2013.
The company added the Mitsubishi
Outlander 2014 to its portfolio
TVS Auto Parts (Pvt) Ltd
The smallest business in the group,
TVS Auto Parts, supplies OEM and
aftermarket parts for Indian vehicles
in the local market. Again the
challenge is collection from a dealer
network that is multi brand and not
dependent on the line of products
represented by this company. Much
restructuring has been done in the
business to reduce expenses, to
collect overdue payments and reduce
stock. The focus for the new year will
also be in these areas.
C. Yatawara
Chief Executive Officer
29 May 2014
Acknowledgements
At the end of a challenging year, I
would like to thank the Chairman
and the Board of Directors for their
support and guidance. I thank all
shareholders for their support and
understanding of the business
environment.
I thank all my staff and management
for their hard work during the year and
our customers for their loyalty and
patronage.
I like to place my appreciation to
our former Chairman Mr. Ranjith
Fernando whose contribution to the
company I would like to acknowledge,
United Motors Lanka PLC | Annual Report 2013/14 19
Management review
IN 1985 MMC OF JAPAN APPOINTED UNITED MOTORS LANKA PLC AS THE SOLE DISTRIBUTOR OF
BRAND NEW MITSUBISHI VEHICLES IN SRI LANKA. UNITED MOTORS LANKA PLC WAS THE FIRST
GOBU TO BE PRIVATISED AND WAS CONVERTED INTO A PUBLIC LIMITED LIABILITY COMPANY.
1.
Group Review
United Motors Lanka PLC (UML)
commenced business in 1945 as
a private company and has grown
into a premier blue chip company
which is quoted on the Colombo
Stock Exchange (CSE). From small
beginnings we have now evolved into
a company that aims to meet the
transportation needs of our nation.
The company was vested in the
government of Sri Lanka in 1972 and
became a government owned business
undertaking (GOBU). This was a
defining year for the company. In 1985
the Mitsubishi Motor Company (MMC)
of Japan appointed United Motors
Lanka PLC as the sole distributor of
brand new Mitsubishi vehicles in Sri
Lanka. United Motors Lanka PLC was
the first GOBU to be privatized and
was converted into a public limited
liability company. The company today
continues as a public limited liability
company.
In 2003 Mitsubishi Truck & Bus
Corporation (MFTBC) was founded,
Daimler AG acquired controlling
interest in MFTBC in 2004. However
UML continues to be the sole
distributor for all Mitsubishi trucks &
buses in Sri Lanka. Today the United
Motors group is considered as a key
and leading player in the automobile
industry in Sri Lanka.
The company continue to look for
diversified business opportunities
which would fit its investment criteria.
The Company continues to retain and
aggressively develop its core business
of selling brand new Mitsubishi
Mitsubishi Vehicles
Rs.4.4
Bn
Total turnover of all Mitsubishi
vehicles sold in
2013-14.
vehicles and providing an efficient
after sales service to its customers.
With this in mind, the company
has invested heavily in acquiring
properties and developing existing
properties and other long term rented
properties.
In the year under review, the company
purchased 10 acres of land in
Ratmalana and hopes to develop it
into a logistics hub for vehicles and
spare parts and to set up a fully
equipped workshop for Mitsubishi &
Fuso vehicles with special facilities to
repair and service large trucks, which
are over 30 feet in length.
We also acquired a one acre &
twenty six perch property in Jaffna
with the sole intention of setting
up a workshop. Plans are under
way to develop this property. Once
developed, the facility will provide
20 United Motors Lanka PLC | Annual Report 2013/14
a full range of workshop services
not previously available in Jaffna.
During the year under review, we
purchased an additional 29 perches
in Orugodawatte. We intend on
expanding our main workshop in
Orugodawatte with this acquisition as
these are adjoining properties.
We rented additional properties in
Anuradhapura and Kandy and have
expanded our workshop facilities
in both locations. We provide the
full range of workshop facilities at
these new expanded locations which
include all mechanical repairs, body
repairs, painting facilities, servicing
and lubrication facilities. Plans are
underway to expand our workshop
facilities in Ratnapura and board
approval has been obtained to
proceed with this expansion.
The UML group of companies at
present includes four fully owned
subsidiaries and a jointly controlled
entity TVS Lanka (Pvt) Ltd and its two
subsidiaries TVS Auto Parts (Pvt) Ltd
and TVS Automotives (Pvt) Ltd.
We divested our 100% owned
subsidiary, Orient Financial Services
Corporation, in 2010/11 and have
TO CONTINUALLY IMPROVE OUR OPERATIONS,
WE DEVELOP TECHNOLOGIES THAT ADVANCE
OUR BUSINESS AND CREATE NEW VALUE.
continued to consolidate our group
businesses within the transportation
industry, thereby focusing our
management resources on our core
businesses, whilst continuing to seek
avenues for investments into areas
that would yield acceptable returns
and meet the expectations of all our
stakeholders.
2.
The Economic Review
A strong rebound was seen in the Sri
Lankan economy with annual real GDP
growth of 7.3 % being recorded, up
from the 6.3% recorded in 2012.
Single digit inflation was recorded,
for the 5th year in succession. The
level of inflation further declined to
the mid-single digit of 4.7% by year
end, down from the 9.2% recorded in
2012 and this compared favourably
with the 4.9% recorded in 2011. The
inflation as recorded by the Colombo
Consumer Price Index (CCPI) reduced
by almost half over the year under
review compared to last year.
sectors. The industrial sector grew by
9.9% raised its share to the GDP to
31.1%.
All sectors of the economy
contributed positively to growth in
2013. The growth which was broad
based showed the industrial sector’s
strong performance. This was
aided by positive growth in both the
manufacturing and construction sub
The service sector which showed
growth of 4.6% in 2012 increased to
6.4% in 2013 mainly due to wholesale
and retail trade and the transport
and communication sub sectors. This
sector continues to be the dominant
sector in the economy with a share
GDP grew from the
previous years 6.3%
Accepting the gold award for the best Annual Report in the Motor category
at the best Annual Report competition conducted by the Institute of
Chartered Accountants of Sri Lanka
7.3
of 58.1% of GDP. All subsectors of
the service sector showed growth
including Banks, Insurance and Real
Estate, subsector.
The hotel and restaurants sector
increased by 22.3%. The sector was
able to attract 1.27 million tourists in
2013 which is an increase of 26.7%
over the previous year. Rs. 1.7 billion
was earned by this sub sector.
% GDP Growth
United Motors Lanka PLC | Annual Report 2013/14 21
Management review contd.
THE CREDIT OBTAINED BY THE PRIVATE SECTOR FROM THE COMMERCIAL BANKS DECLINED IN
2013. THE GROWTH OF CREDIT DECLINED FROM 17.6% IN 2012 TO 7.5% IN 2013. EXPORTS GREW
BY 6.4 % IN 2013 WITH THE GRADUAL RECOVERY OF THE GLOBAL ECONOMY.
Migrant worker remittances recorded
a significant improvement in the year
under review. Remittances increased
from US $ 6.0 billion to US $ 6.4
billion in the year under review.
The agricultural sector declined from
the 5.2% GDP growth recorded last
year to 4.7% in the current year due
to the unfavourable weather conditions
that prevailed in the first half of the
year. This continuing cycle of extreme
weather conditions from droughts
to floods needs to be addressed and
is mainly due to pollution and the
uncontrolled and illegal felling of the
forest cover. If the agricultural sector
is to grow, then policies and laws must
be implemented to control all areas
which contribute to these extreme
weather patterns.
2013 saw added focus on economic &
social infrastructure projects. The year
saw the completion of the Airport at
Mattala, Port and Port development
projects, expressways and highway
development projects, the Northern
railway project and other projects
including rural development projects.
Low inflation, declining interest rates
and a relatively stable exchange rate
contributed towards the growth of the
economy, a turnaround from 2012
where in addition, restrictive monetary
policies such as credit ceilings and
increase in policy interest rates were
seen.
A marked improvement in certain
public corporations such as the
Ceylon Electricity Board (CEB) &
Ceylon Petroleum Corporation (CPC)
were seen with the CEB generating
an operating profit and the CPC
showing reduced losses thus enabling
these two institutions to settle a part
of their obligations to the banking
sector. However, the viability and
constant cash drain from most public
sector corporations including the two
airlines continues to be of serious
concern. Even though the service
sector recorded a GDP growth over
that of the previous year, the banking,
insurance and real estate subsectors
showed a GDP decline from 6.7% in
2012 to 5.9 % in 2013 and this is a
cause for concern.
Several initiatives have been
undertaken as social development
projects aimed at health and
education services. The Colombo city
beautification project and other such
projects have contributed immensely
to promoting Sri Lanka as a holiday
and business destination venue.
The credit obtained by the private
sector from the commercial banks
declined in 2013. Other features
such as narrow interest rate margins,
non – interest expenses, provisions
and write-off’s led to the fall in the
profitability and growth of the banking
sector. The growth of credit declined
from 17.6% in 2012 to 7.5% in 2013.
Policy measures introduced in 2012
which were aimed at macroeconomic
stabilization were somewhat eased in
2013, thus creating a more conducive
environment for economic growth in
2013.
Exports grew by 6.4 % in 2013 with
the gradual recovery of the global
economy. Exports to EU & US who
are major importers of Sri Lankan
products, importing 6.8% and 21%
respectively of our exports, indicating
22 United Motors Lanka PLC | Annual Report 2013/14
our dependency on these two
importers.
Our tea and spices continued to
command premium prices due to
our quality when the prices of most
commodities declined world-wide.
Expenditure on imports declined by
6.2% in the year under review while
non-fuel imports showed a fall of
3.2%. The decline in imports was
mainly due to the decline in imports
of fuel and textiles, while investment
goods showed a decline of 7.3 % in
2013.
Imported consumer goods recorded
an increase of 7.3%, mainly from food
and non-food items. The increase of
17.6% in the importation of motor
vehicles was seen in 2013. This is
categorized as consumer expenditure
in the non-food category.
In 2013, 100 basis points were
reduced by the Central Bank in two
steps on its policy interest rates, this
together with a reduction of 2% of the
Statutory Reserve Ratio (SRR) to 6%
enabled the market rates to decline
significantly, however the appetite for
credit remains low with an average
excess in domestic money liquidity of
Rs. 23 billion in the year under review.
The country’s exchange rate policy is
focused on maintaining the flexibility
of the exchange rate. The Sri Lankan
Rupee depreciated versus the US
Dollar by 2.7% over the year to close
at Rs. 130.75. The rupee depreciated
by around 5% in June 2013 and by
early September 2013 it appreciated
to record an overall year to date
depreciation. The overall balance
Movement of US $ vs Rs.
The Sri Lankan Rupee weakened by
2.8 % against the US Dollar in 2013
and strengthened by 16 % against
the Japanese Yen in the year under
review.
(Rs.)
Exchange rate
150
120
of the Balance of Payments (BOP)
improved in 2013. The overall balance
of the BOP recorded a surplus of US$
985 million in 2013 compared to a
surplus of US$151 million in 2012.
Foreign Direct Investment (FDI) in
2013 amounted to US$ 1.421 billion
compared to US$ 1.382 billion in
2012 which is a marginal increase.
Its four full years of economic activity
since the end of the conflict in 2009
and expected results with the end of
the conflict are yet to be fully seen and
we are ever hopeful that before long,
the full extent of the peace dividend is
enjoyed by all people.
The opportunities created by the
elimination of terrorism in the country
are yet to be exploited and this has
been highlighted and repeated in our
past management reviews. A period of
stable exchange rates and low interest
rates is what is required and is good
for the economy and we urge for a
consistent policy on customs duties
etc, on the import of motor vehicles.
In 2013 the global economy grew
at a slower pace, despite the signs
of economic activity. Towards the
latter part of the year, economic
activity in advanced countries picked
up towards the second half of the
year due to increasing domestic
demand and improving consumer
and business confidence. Emerging
economies slowed down due to
weak domestic demand. Meanwhile
developing economies continue to
grow despite the challenges they have
in areas of employment, infrastructure
development and diversification.
2009
2010
2011
2012
2013
Global growth which was expected to
improve was marginally lower than
the 3.1% recorded in 2012. Growth
Table 2 below indicates the year-end
value of the Sri Lankan Rupee (LKR)
against the Japanese Yen and the US
in 2013 is estimated to be 3%. The
US economy grew by 1.9 % in 2013,
compared to 2.8% in 2012, the EU
did not show significant growth.
Dollar in the last 05 years.
A 4.4% increase in 2013 of
unemployment rates was seen
compared to the 4.0% recorded
in 2012 which was the lowest rate
recorded since 1990.This increase is
mainly due to the entry of new job
seekers to the labour market.
The inflation table below indicates
rates of inflation over the past five
years.
Table 1
Rate of Inflation (%)
Year
Ended
Year on
Year
CCPI
Annual
Average
CCPI
2009
5.0
3.5
2010
6.8
6.2
2011
4.9
6.7
2012
9.2
7.6
2013
4.7
6.9
Currently, the US Dollar trades at
Rs 131.80 and the Yen at Rs 1.2998
as of 26 May 2014.
Table 2
Year
Ended
Exchange Rates Vs. SL Rs.
USD
JPY
2009
114.38
1.2413
2010
110.95
1.3611
2011
113.90
1.4669
2012
127.16
1.4799
2013
130.75
1.2459
Source: Central Bank Annual Report 2013
Rates of interest
Rates of interest showed a steady
decline over the year. This was
facilitated by a reduction in policy
interest rates and excess liquidity in
the money market. Short term rates
of interest reduced sharply, while long
term rates have not yet adjusted fully.
The weekly Average Weighted Prime
Lending Rate (AWPLR) declined by
427 basis points in 2013.
Source Central Bank Annual Report - 2013
Exchange rates
The Sri Lankan Rupee weakened by
2.8 % against the US Dollar in 2013
and strengthened by 16 % against the
Japanese Yen in the year under review.
With the decrease in rates of interest
in 2013, affordability of motor vehicle
ownership increased and although,
other factors contributed to the
negative growth of vehicle ownership.
United Motors Lanka PLC | Annual Report 2013/14 23
Management review contd.
decrease of 12,824 vehicles and a
26.24 % drop in volume.
In 2013, 326,651 motor vehicles were registered,
a decline of 17.8% over the 397,295 vehicles
registered in 2012 and decline of 37.8% over the
525,421 vehicles registered in 2011.
We hope that this low level interest
rates will continue.
Table 3 shown below indicates the
movement of rates of interest in the
last five years and is in respect of the
commercial bank’s Average Weighted
Prime Lending Rate (AWPLR).
Year
AWPLR
Treasury Bill
Yield Rate
(91 days)
2009
10.91
7.73
2010
9.29
7.24
2011
10.77
8.68
2012
14.40
10.00
2013
10.13
7.54
Source: Central Bank Annual Report 2013
The All Share Price Index (ASPI) grew
by 4.8% in 2013 over that of the
previous year indicating a marginal
improvement in performance over
2012. The ASPI showed negative
growth of 7.1% in 2012 and 8.5% in
2011. Market capitalization increased
by 13.4% or by Rs 292 billion to
close 2013 at Rs 2.46 trillion. The
downward trend in domestic interest
rates and stable exchange rates were
some of the features that contributed
to the upward movement of the stock
market.
The import of Indian, Chinese,
Malaysian and Korean vehicles has
increased significantly over the last
few years.
by 6.2% compared to the previous
year. Average daily turnover declined
from Rs 884 Mn in 2012 to Rs 828
Mn in 2013.
The expenditure on vehicle imports
has increased from US $ 495 in
2012 to US $ 582 in 2013. This is an
increase of 17.58 %.
Table 4, below indicates the year end
indices over the past 5 years.
3.
Table 3
Analysis of registered brand new
vehicles by vehicle type in the last 3
years is given in Table 5 below.
The Automobile Market
In 2013, 326,651 motor vehicles
were registered, a decline of 17.8%
over the 397,295 vehicles registered
in 2012 and decline of 37.8% over
the 525,421 vehicles registered in
2011. This is in respect of all vehicles
including two wheel and three wheel
vehicles and includes reconditioned
vehicles as well.
4.
Reporting company
performance by segment
Direct intervention and lack of
demand for funds have driven
down interest rates. This is indeed
encouraging and we hope that this will
be a long term feature. Stable and low
rates of interest mean lower cost of
funding working capital requirements.
They also impact the cost of financing
Brand new four-wheel vehicles
registered totalled 36,064 units a
Table 4
Year
CSE ASPI
CSE Motor
sector
Market
capitalization
Rs. Bn
2009
3,386
7,214
1,092
2010
6,636
24,514
2,211
2011
6,074
27,115
2,214
2012
5,643
15,652
2,168
2013
5,913
14,955
2,460
(ASPI – All share Price Index 1985 = 100)
Source Colombo Stock Exchange
Table 5
Foreign investors contributed a net
inflow of Rs 22.9 billion during the
year under review. However, during
the year under review only two
Initial Public Offerings (IPO’s) were
launched, raising Rs 2 billion. Tax
incentives are available for companies
listing on the Colombo Stock Exchange
(CSE). Turnover activity levels dropped
Description
Car
SUV
Dual Purpose
Truck
Bus
Total
24 United Motors Lanka PLC | Annual Report 2013/14
2011/12
2012/13
2013/14
Decrease over
2012/13 (%)
27,868
10,959
7,657
-30%
4,853
4,647
4,542
-2%
8,211
6,042
1,397
-77%
28,870
25,210
20,906
-17%
3,764
2,030
1,562
-23%
73,566
48,888
36,064
-26%
vehicle purchases making vehicles
ownership more affordable.
Rates of interest, exchange rates,
custom duties and other fiscal
levies impact directly on the cost
of ownership of a vehicle, this in
turn affects customer demand and
it has a very substantial impact on
our business. During the year under
review we saw interest rates reduce
significantly and exchange rates
were stable throughout the year.
However, customs duties and other
fiscal levies were imposed without a
long-term strategy in mind. This led
to a significant fall in demand and
reduction in the number of vehicle
registrations.
a)
Mitsubishi vehicle sales
Our share of Mitsubishi brand new
vehicle registrations is shown in Table
6 which indicates that UML’s share of
brand new vehicles registered in 2013
is 6%. The Mitsubishi share in each
of the segments is also indicated.
Our share has remained constant
in comparison to the previous year.
However our share of SUV’s has
reduced significantly as this is due to
the tapering off of the permit scheme.
However we have gained market share
in the car and dual purpose vehicles
segments.
The Mitsubishi share of recent
imports of brand new Japanese
vehicles, (based on Japanese export
statistics) is given in Table 7.
During the year under review United Motors was selected as the supplier
of surveillance and recovery vehicles for the Katunayake Expressway.
TABLE 6:
Composition of Mitsubishi Share (%)
2012/13 (%)
Car
SUV
2013/14 (%)
0.8
1.6
44.0
28.0
Dual purpose
7.0
13.0
Truck
1.7
1.8
Bus
2.0
2.0
Total
6.0
6.0
TABLE 7:
Year
Brand new
Japanese units
imported
Mitsubishi share /
units imported
Mitsubishi
share %
2006
3,587
960
27%
2007
6,631
1,993
30%
2008
7,533
1,864
25%
2009
613
223
36%
2010
2,406
576
24%
2011
5,694
1,061
19%
2012
2,851
852
30%
2013
4,351
1,780
41%
United Motors Lanka PLC | Annual Report 2013/14 25
Management review contd.
The spare parts division’s contribution to net
turnover is significant and amounted to
Rs. 1.75 Bn, or 25% of total net turnover. Sales
performance for the year under review exceeded
budget and exceeded last years performance by
Rs. 497 Mn or 40%.
performance and will continue to do
so unless new permits are issued.
All our branches were upgraded
with workshop facilities which
include body repairs, mechanical
repairs and other service and
lubrication facilities. The increase
in repairs at these workshops
has resulted in the increase in
consumption of spares which has
resulted in this 22% contribution
to company turnover.
In 2013, Mitsubishi captured 41% of
the total brand new Japanese imports.
Our market share has been increasing
gradually since 2011.
The demand for vehicles decreased
during the year under review. This
downturn is mainly due to the decline
of the economy and increases in
the cost of motor vehicle ownership
mainly due to increases in import
customs duties and levies.
While UML, lending and other financial
institutions have in recent months
jointly tried to stimulate demand by
reducing the size of down payments
and loan instalments, increased loan
repayment periods. These initiatives
have met only with limited success.
Permits continue to be issued, but
the volumes seen previously are
not evident now. Sales of permit
vehicles in recent months have seen
a reduction of more than 80%. This
has seriously affected bottom-line
Demand for Mitsubishi ex stock
vehicles will continue to decline with
many customers opting for cheaper
Indian, Chinese, Korean and Malaysian
products.
Purchases of vehicles for stock
follow strict guidelines. In assessing
demand, stock in hand and stock on
order are considered and followed
meticulously with stock norms being
adhered to. Efficient working capital
management has ensured that interest
has been maintained at the lowest
possible levels with interest being
earned on surplus funds.
6.
Mitsubishi spares
The spare parts division of UML has
been a significant contributor towards
company profitability this year too
as in previous years. The spare parts
division’s contribution to net turnover
is significant and amounted to Rs
1.75 Bn, or 25% of total net turnover.
Spares are sold through all our island
wide branches and our own outlets
and through our extensive dealer
network. The expansion of our island
wide workshop facilities has further
enhanced workshop spare part sales.
Sales performance for the year under
review exceeded budget and exceeded
last years performance by Rs. 497 Mn
or 40%. The target driven sales team
in the spare parts division contributed
immensely to this record breaking
level of sales. The best teams are
rewarded with cash & other rewards.
26 United Motors Lanka PLC | Annual Report 2013/14
The division’s close and programmatic
monitoring of the performance
of each sales unit and the active
guidance and support provided
by management assisted in the
achievement of targets set for the
year under review. In 2013, we
continued our reward schemes as
an incentive for greater performance
and this motivates staff at all levels
towards sound overall performance
of the division and company. The
company continues to offer a variety
of attractive rewards and incentive
schemes with a view to precipitate
peak performance. This is even more
important now as the sales of the
spares becomes very challenging in a
highly competitive market.
The spare parts division currently
operates sales counters at our own
branches and sales points located
in Orugodawatte, Panchikawatte,
Nugegoda, Matara, Ratnapura. Kandy,
Kurunegala, Anuradhapura and
Jaffna. All our branches now operate
workshops facilities and this has
contributed to increase branch spare
parts sales.
The spare parts division in a bid
to capture greater market share
introduced a second line of spares
from MMC and MFTBC, a market
dominated by spurious spare parts.
The MMC line is called Value
Selection Parts and the MFTBC line
is known as Diamond Value Parts.
The introduction of these lines has
been very successful. The division
also introduced a complete package
of accessories designed to improve
the appearance of the Montero at
OUR WORKSHOP’S CONTRIBUTION TO COMPANY NET TURNOVER WAS RS. 521 MILLION IN THE
YEAR UNDER REVIEW ONLY ON LABOUR INCOME COMPARED TO LAST YEAR’S RS. 408 MILLION,
A 27.7 % INCREASE.
an affordable price and the demand
for this package exceeded our
expectations.
Our principals (MMC and MFTBC) are
constantly made aware of the ever
changing market conditions in Sri
Lanka through regular meetings and
presentations. The constant movement
of the Rupee has meant that selling
prices are constantly changing with
each shipment. MMC and MFTBC are
appreciative of the activities of the
division.
b.
Repairs and services
During the year under review,
workshops which were newly
opened in the branches, delivered
their full potential. Our Kandy and
Anuradhapura workshops which
were expanded, are now equipped
to handle all types of body repairs,
mechanical repairs, body painting,
service & lubrication facilities. Plans
are underway to further expand
the workshop facilities in Jaffna,
Ratnapura and Kurunegala. The
company has invested in excess of Rs.
100 million to further upgrade all our
workshop facilities including our main
workshop at Orugodawatte.
Our workshop’s contribution to
company net turnover was Rs 521
million in the year under review
only on labour income compared to
last years Rs 408 million, a 27.7%
increase.
The equipment installed will deliver
value to the workshop through
quality enhancement which will
result in improved productivity and
faster turnaround times and will also
increase capacity. Quality assurance
Our Kandy workshop which was opened in the year under review
conducted a service campaign as part of our value added services. Our
technicians are well trained and are afforded training both locally and
internationally.
enjoys an important place in our
internal processes and is vital to
control and reduce the occurrence of
efficiency and productivity losses and
returned jobs.
The division exceeded both top line &
bottom line budget. Our waste water
purifying and recycling plants continue
to operate within the standards laid
down by the regulatory authorities
such as the Central Environment
Authority and Municipal Councils in
the areas we operate in.
Continuing our value added services,
we conducted service campaigns
in several cities around the country
during the year under review. Our
training unit continued as “M-step”
programme in line with the Mitsubishi
Motors training programme and
all our technicians were trained
to achieve “M-step” Level ll. In
addition to our in house training 14
technicians and service advisors were
trained in Japan at the Mitsubishi
Training Centre at Okazaki and other
overseas training centres. The training
divisions continue to conduct training
programmes for fleet owners.
Rs.1.75
Bn
The spare parts division contribution
to total company turnover
United Motors Lanka PLC | Annual Report 2013/14 27
Management review contd.
systems and the IT systems of most
of our group companies.
Our ERP system continues to integrate
all divisions and functions across the
company, facilitating greater efficiency
and effectiveness of all processes and
controls.
We are continuously upgrading our
system hardware and in the year
under review we replaced our data
base server with an upgraded new
version with a larger capacity. We also
develop in-house software to handle a
multitude of functions.
For the very first time Valvoline hosted their South East Asia Regional
conference in Sri Lanka.
UML’s Valvoline division won an award for the highest growth in all
segments of market in the South East Asian Region. This award was made
in Sri Lanka.
d.
Valvoline lubricants and Eagle
One carcare products.
Valvoline has been marketed in
Sri Lanka since 2002 and now is a
well-accepted brand in the lubricant
industry in Sri Lanka.
The brand has been established in
more than 140 countries. Ashland Inc.
is the holding company of Valvoline
and has been in business for over 130
years. Valvoline operates more than
40 blending plants worldwide.
Net sales of Rs 366 Mn were recorded
by the Valvoline division in 2013,
an increase of Rs 63 Mn over that
of the previous year. The division’s
contribution to the company profit was
Rs 60.4 Mn.
2013 was a challenging year for
the lubricant division. Being in the
premium category of lubricants
it operates from price differential
disadvantage in addition to all
disadvantages stemming from the
past where the lubricant industry
was state controlled. In 2013 UML’s
Valvoline division won an award for the
highest growth in all segments of the
market in the south East Asian region
based on its 2013 performance. The
award was presented in Sri Lanka
when our island nation played host
to Valvoline’s South East Asia Region
Conference,
In the year under review, the division
launched green products under
the car care range; this is another
segment of products the division
manages.
e.
Information Technology
Our IT system continues to play a
vital role in supporting our current
operations and its new initiatives.
Its prime role is that it overlooks
and maintains all our island wide IT
28 United Motors Lanka PLC | Annual Report 2013/14
f.
Capital Expenditure
Company capital expenditure in the
year under review amounted to Rs 753
Mn, an increase of Rs 596 Mn over
that of the previous year.
A major portion of capital expenditure
was spent on the acquisition of land
in Ratmalana, Orugodawatte & Jaffna.
4.2 Subsidiary Company Operations
a)
UNIMO Enterprises (UEL)
The same market conditions that
primarily affected UML vehicle sales
affected UEL vehicle sales also, this is
seen across all brands represented by
UEL in Sri Lanka. The most affected
were the Perodua and JMC brands
where vehicle sales reduced by more
than 54% and 41% respectively. The
application of innovative strategies
and with the assistance of our
principals, Perodua increased market
share, while JMC maintained its
market share in the year under review.
UEL reported a profit after of tax of
Rs 148 Mn, a reduction, more than
54% compared to the last year.
Our assembly plant which was set up
in Ranala with state of the art facilities
can assemble around 400 vehicles per
month. The vehicle assembly business
was also affected by increases in
taxes, which led to a drop in sales.
The facility made an operational loss
during the year under review. Plans
Orient Motor Company introduced the DFSK mini
truck in August 2011 and since then its market
share has grown to 10%.
During the year under review, a profit
after tax of Rs 51 Mn was recorded,
this is a reduction in profit when
compared to last year’s profit of
Rs 54 Mn.
Changes to the import duties brought
in April 2012 in respect of three
wheelers continue with subsequent
increases in taxes of almost 10 % in
each year since then. Customs duties
on the import of two wheelers remain
largely unchanged since the increase
in 2012. The separation of Hero &
Honda businesses during the year had
an added effect to competitiveness.
DFSK - Mini Truck
10
%
Market share earned within 20
months of market entry.
are under way to assemble some
cost effective models this year which
the company believes will contribute
towards a turnaround of the assembly
operation.
Even though the market conditions
have not changed, UEL is confident
of the future and launched the MG
(Morris Garage) brand of vehicles
towards the end of the year under
review. Initial indications of customer
acceptance are very encouraging.
b)
Orient Motor Company Limited
(OMCL)
The company introduced the DFSK
mini truck in August 2011 and since
then its market share grew to 10%.
In a fiercely competitive market, in
2012 the company sold 1,517 mini
trucks and was able to sell only 1,176
trucks in 2014. The reason for the fall
in sales volume was due to a change
in customs import duties which made
the product less competitive. This
change was made mid-way in the year
under review. During the first half of
the year sales were high under the old
duty structure.
Representations were made to the
relevant authorities and duties were
reduced but are not back to the
previous levels. The product is still not
competitive with other models in the
market.
Due to this change in duties we are
now in the process of developing a
new model which would fall under the
lower duty category. Expectations are
high for DFSK to regain its market
position in the new financial year. The
company made a profit after tax of Rs
75 Mn in 2012, profits fell to Rs 5 Mn
during the year under review.
4.3 Jointly controlled entities
a)
TVS Lanka (Pvt) Limited (TVSL)
The Company’s primary product range
are two wheelers and three wheelers
and it is a joint venture with T. V.
Sundaram Iyengar & Sons Limited
of India. The Company also provides
after sales services for its two and
three wheeler business.
The Table 8 below indicates the way
the market behaved post April 2012.
It has been a continuous decline since
then.
This decline in the total market is
yet to be reversed. The fall in volume
over the last 3 years is 84,051 two
wheelers and 54,753 three wheelers.
A 33% and 40% drop respectively
and the market still shows no signs of
recovery.
In these circumstances, the company
concentrated on strengthening the
dealer network for the two wheeler
business, improving infrastructure
development and quality of service.
The company also focused on
operational efficiencies and the
effective management of the inventory
levels in the business. These efforts
helped to achieve a modest but still
significant net profit of Rs 51 Mn.
As the market starts to adjust to the
new market condition environment,
it is expected that demand will pick
Table 8
New Registrations of Motor Vehicles
2011 (units)
2012 (units)
2013 (units)
Two wheelers
253,331
192,284
169,280
Three wheelers
138,426
98,815
83,673
Source: Central Bank Annual Report 2013
United Motors Lanka PLC | Annual Report 2013/14 29
Management review contd.
THE MARKET FOR AUTOMOTIVE SPARE PARTS REFLECTED THE OVERALL MARKET SENTIMENT THAT
PREVAILED DURING THE YEAR UNDER REVIEW. WE ARE OPTIMISTIC THAT THE MARKET CONDITIONS
WOULD GRADUALLY IMPROVE FROM THE SECOND HALF OF 2014.
up, albeit gradually and since we
have concentrated on strengthening
the fundamentals, we are excellently
positioned to reap the ensuing
benefits.
b)
TVS Auto Parts (Pvt) Limited
(TVSAP)
A subsidiary of TVS Lanka, the
company is in the business of
importing & distributing motor
spares for the aftermarkets of Indian
commercial & non commercial
vehicles.
The company turnover reduced to
Rs 239 Mn recording a reduction of
24% over the previous year. A loss of
Rs 12 Mn recorded in the year under
review against a loss of Rs 31 Mn
incurred in the previous year. Sluggish
markets & falling margins were some
of the reasons for the losses incurred.
Additionally, a division was setup
to sell two wheeler & three wheeler
spares, the start-up costs of the
division were high. We are confident
of a return to profit in the next
financial year. In order to archive this,
rationalization of our product lines &
the current business model has been
completed.
In addition to acquiring a number
of prestigious agencies including
distribution rights of India Pistons
Limited, KSPG engine bearings &
Supragit control cables, the company
launched its own brands of automotive
spare parts, Autopower & Poweride.
These brands carry a broad range
of product categories offering good
value & excellent quality. Our brand
Corporate Social Responsibility initiatives have been carried out by the
company with majority of this initiatives being educational. In the year
under review students living in vicinity of our Orugodawatte workshop were
presented with schooling requirements.
strategy fulfils a long felt need among
our customers who expect reliable
products under a single brand that
they can trust, a brand promise we
offer thanks to the technical expertise
& experience of our global sourcing
team of automotive engineers based
in Chennai, India.
The market for automotive spare
parts reflected the overall market
sentiment that prevailed during the
year under review. We are optimistic
that the market conditions would
gradually improve from the second
half of 2014. Additional product lines
30 United Motors Lanka PLC | Annual Report 2013/14
to cater to the new category of Light
commercial vehicles (LCVs) have also
been introduced.
The company continues to enjoy
a distinguished position in the
aftermarket space for motor spares
with a significant presence across
all the categories of motor vehicles
from heavy commercial vehicles,
light trucks, passenger cars,
motorcycles and three wheelers
offering well recognized brands from
reputed OEM’s (Original Equipment
Manufacturer) as well as Tier One
suppliers.
The lubricant business achieved turnover of
Rs. 676 million in the year under review against
Rs. 552 million in the previous year, registering a
growth of 22.5%.
c)
TVS Automotives (Pvt) Limited
(TVSAM)
A subsidiary of TVS Lanka, the
Company is involved in the business
of importing and distributing
Lubricants and related products from
Bharath Petroleum Corporation, India
and tyres and tubes marketed under
renowned brand names JK Tyres &
TVS Tyres also from India.
During the year under review, the
Company achieved turnover of Rs 969
Mn against Rs 831 Mn last year. The
Company was able to break even in
the year under review and recorded a
marginal profit after tax of Rs 1.1 Mn
against a loss of Rs 21.5 Mn last year,
a remarkable achievement and
turnaround.
The main contributory factor for the
turnaround is the increase in margins
in the lubricant business, strict cost
control, increases in lubricant volumes
and the restructuring of bank facilities
and the reduction in interest rates.
The lubricant business achieved
turnover of Rs 676 Mn in the year
under review against Rs 552 Mn
in the previous year, registering a
growth of 22.5%. The gross margin
of the business which is around 15%
at present was 10% in the last year.
However, with the support of Bharat
Petroleum Corporation and a change
in the product mix, gross margins
have improved.
Currently, we occupy 5th position
among other lubricant competitors, up
from 6th position last year. However,
the sales channel of fuelling stations
and petroleum service stations is not
available to us due to restrictions
placed by the Ceylon Petroleum
Corporation. The company achieved
greater geographical coverage by
extending the sales force to the
Northern Province and the Uva
Province. In addition, we setup two
sub warehouses in Embilipitiya and
Dambulla to increase distributor
frequencies to the outstations and to
reduce cost.
The tyre business has achieved a
turnover of Rs 293 Mn during the year
under review against Rs 278 Mn in
the last year, registering growth
of 5%.
Trade receivables continue to be very
high resulting in high investment in
working capital. However, the cost
of interest expenses on financing
these investments has decreased
substantially due to the reduction in
rates of interest and restructuring
of bank facilities. During the year
under review, much effort was spent
on debt collection so as to be within
our trade debt norms. We were
partly successful. However, this effort
continues.
4.4 Future Outlook
We started the current financial year
hoping for lower rates of interest,
stable exchange rates and lower
customs and fiscal duties.
While exchange rates were stable
and rates of interest reduced, duties
were increased twice during the year
under review. We look forward to the
continuation of low rates of interest
and the stability of the exchange rate,
and the lowering of customs duties
and other fiscal levies on imports.
Rates of interest that are as low as 8%
presently should continue. However, as
Unimo Enterprises Ltd our fully
owned subsidiary opened its
own branches in Ratnapura and
Badulla.
These branches carry the full range
of vehicles sold by the company
and include Perodua, JMC, Zoyte
and MG Vehicles.
a minimum, the current rates should
be maintained as at present, thus
ensuring stability of the exchange
rate.
We hope customs duties etc will be
lowered during the current financial
year, thus ensuring that motor vehicle
ownership is more affordable.
While exchange rates cannot be
predicted accurately, especially the
Japanese Yen Vs the Sri Lankan
Rupee, decisions on imports of
vehicles on ex stock basis will have to
be carefully considered so as to not
over burden our working capital while
ensuring that stocks are available
to supply our customers. We will
constantly monitor exchange rates,
interest rates and changes in duties
and fiscal levies.
The change in economic dynamics
will require UML, and its group
of companies to adopt strategies
of diversification and expansion
to capitalize on the development
plans of the Government. These new
United Motors Lanka PLC | Annual Report 2013/14 31
Management review contd.
The Sri Lankan economy is expected to accelerate
over the medium term, benefiting from positive
economic activity locally and the trickledown
effect of the expected growth globally.
Valvoline with an eye on the future
and with the need to go green
introduced eco-friendly lubricants
and car care products.
UML will continue to invest in building
the Mitsubishi brand in Sri-Lanka
upgrading all facilities including
workshop facilities, spare parts
availability, product availability,
developing our human resource skills
and upgrading and maintaining our
group wide infrastructure system.
Unimo Enterprises Ltd a 100 percent
owned subsidiary has a license to
These products are being
introduced by the Valvoline car
care products division- Eagle One.
assemble vehicles of Chinese origin.
We have assembled and sold over 400
such vehicles and the present demand
for this vehicle is very encouraging.
strategies will focus on exploiting
the new opportunities that will arise
with the upturn of business in Sri
Lanka. The ‘Wonder of Asia’ vision
will indeed create many opportunities
for companies such as yours to add
to their portfolio of products and
services.
On the global front, the world
economy is projected to grow at 3.7%
in 2014 and 3.9% in 2015 from 3%
in 2013. Meanwhile, with the end
of the long recession in Europe, the
EU economy is expected to grow
from the present 1 % to 1.4 % in
2015. Emerging economies are also
expected to grow 5.1% in 2014 and
5.4 % in 2015 due to expected
increases in consumer spending and
steady increase in exports.
Much more economic activity is
possible with the opening up of the
North and East. However to date that
high-level is yet to be seen. It will take
more time as people re-build their
shattered lives. We are cautiously
optimistic that the North and East will
return to its former self, sooner rather
than later.
To support this vision, the Company
opened a branch in Jaffna in January
2012. This branch provides a range of
services which includes vehicle sales,
workshop facilities and spare part
sales counters. We are in the process
of expanding the workshop facilities at
our Jaffna Branch.
The Sri Lankan economy is expected
to accelerate over the medium term,
benefiting from positive economic
activity locally and the trickledown
effect of the expected growth globally.
Our economy is expected to grow
to 7.8 % from the current 7.3%
and reach the 8% level from 2015
onwards.
5.
Financial Review
In 2010 & 2011 GDP growth rates of
8.0 % and 8.2 % were achieved and
this was achieved in the back drop of
the end of a 30 year old conflict. The
32 United Motors Lanka PLC | Annual Report 2013/14
post conflict period was uncertain.
However, since parliamentary and
presidential elections were held in
2010, the resulting political stability
has been a major reason for the
economy to achieve these rates of
growth.
The drop in GDP growth to 6.3% in
2012 was due to many reasons with
the agricultural sector declining due to
the unfavourable weather conditions.
Other factors such as exchange rates,
rates of interest, these together with
the balance of payments required
certain changes in fiscal policy which
had an impact on the growth of the
economy.
The automobile industry was also
affected by the above variables and
was additionally impacted by the
increase in import duties and other
import levies. World economies also
did not recover as expected. This
impacted Sri Lanka.
The year under review has shown
improvement over that of the previous
year with GDP growth of 7.3%, and
for the first time in more than 5 years,
the rupee had appreciated against the
Japanese Yen. This has had a positive
effect on vehicle prices. Increases
in duty during the year dampened
the demand and we still operate in
reduced economic environment.
The availability of permits has
significantly declined towards the end
of the year under review and there
are no indications of more permits
being issued. As predicted in our
management review last year the
demand for vehicles fell further, the
major reason for this is the increase in
customs duties and fiscal levies. Due
to the many variables, we are unable
to predict demand levels for 2014.
No company in the group showed
improved performances over that
of the previous year except for TVS
Automotives (Pvt) Ltd and reduction
of loss of TVS Autoparts (Pvt) Ltd.
5.1
Turnover of Parent Company
(UML)
The company recorded a turnover
of Rs 7.0 Bn compared to last
year’s turnover of Rs 8.8 Bn, a
drop of 20.5%. Only the workshop
and spare parts divisions exceeded
budget and exceeded their last
year’s performance. The vehicle
sales division which consists of
the passenger vehicle sales, truck
& bus sales and the permit vehicle
sales exceeded budget but did not
exceed last year’s performance. The
performance of Valvoline division was
above budget, and above last year’s
performance also.
Unimo Enterprises Ltd started marketing MG vehicles which will fill a gap
in our group’s product portfolio
of the previous year. This decrease
of 24% is due to the reasons given
previously in the report.
Subsidiary companies and jointly
controlled entities.
During the year under review, all
subsidiary and jointly controlled
entities recorded turnover’s of less
than that of the previous year except
for TVS Automotives (Pvt) Ltd.
All our branches reported profits
during the year under review.
5.2
Profit before tax Parent
Company (UML)
UML earned Rs 1.98 Bn as profit
before tax for the year under review
compared to Rs 2.44 Bn earned in the
previous year. This decline is directly
The subsidiary companies contributed
Rs 6.85 Bn towards group turnover,
a decrease of Rs 2.15 Bn over that
An analysis of turnover by major
product categories in comparison with
the previous year is shown in Table 9.
Table 9
Company
Activity
2013/14
Rs. Mn
Motor vehicles
Motor cycles
Tractor & accessories
Group
2012/13
%
Rs. Mn
2013/14
%
2012/13
Rs. Mn
%
Rs. Mn
%
4,402.82
62.53
6,807.58
77.58
8,779.57
63.21
13,365.15
75.18
-
-
-
-
1,526.65
10.99
1,527.66
8.59
-
-
-
-
0.12
0.00
3.59
0.02
1,750.70
24.86
1.253.55
14.29
2,051.14
14.76
1,563.43
8.79
Repairs & services
520.70
7.40
408.25
4.65
473.02
3.41
327.86
1.85
Lubricants & car care
366.06
5.20
303.53
3.46
703.68
5.07
589.98
3.32
-
-
-
-
356.21
2.56
397.80
2.24
Spare parts
Tyres
Financial services
Others
Total
-
-
-
-
-
-
-
-
0.91
0.01
1.33
0.02
-
-
1.11
0.01
7,041.19
100.00
8,774.24
100.00
13,890.39
100.00
17,776.58
100.00
United Motors Lanka PLC | Annual Report 2013/14 33
Management review contd.
The initiatives made in the previous years to
reduce the cost of fuel, utility costs and other
maintenance expenditure continued into the
current year and these efficiency measures have
now been intrinsically woven into the operational
model of the company.
TVS Automotives which recorded a
loss of Rs 21.6 Mn in 2013, reported
profits of Rs 1.1 Mn in the year under
review. As reported in last year’s
review, we paid special attention
to this company and implemented
strategies and alternate business
plans to transform this loss making
entity into a profitable company. These
included strict debtor, and stock
management, review & reassessment
of loss making product lines.
TVS Auto Parts was also able to
reduce their losses from Rs 31 Mn in
2013 to Rs 12 Mn in 2014.
attributable to the fall in demand for
motor vehicles experienced by the
entire automobile industry.
The company also earned a gross
profit of Rs 2.88 Bn a decline of 7.3%
over that of the previous year.
Our continuous vigilance of overheads
ensures that increases in cost are
kept minimal. The initiatives made
in the previous years to reduce the
cost of fuel, utility costs and other
maintenance expenditure continued
into the current year and these
efficiency measures have now been
intrinsically woven into the operational
model of the company. Investment in
capital assets followed a very strict
evaluation process and all capital
investment initiatives continue to be
on a fit for purpose basis.
Finance overheads in total showed
a net income position of Rs 341
Mn compared to Rs 370 Mn income
in the previous year. This interest
income is mainly due to the surplus
funds available for investment in the
company.
Strict cost controls continue to be
implemented throughout the company.
Despite this a 15% increase in
overheads amounting to Rs 163 Mn
was evident during the year decreased
by 25% compared to previous year.
This was mainly due to increased
expenses incurred in maintaining our
outstation branches and the general
increase in services & other costs.
UML continues to invest in the stock
market and as at the year end, our
investments totalled Rs 632 Mn
down from Rs 676 Mn invested last
year. This investment brought us net
dividends of Rs 53 Mn and capital
gains of Rs 74.5 Mn during the year
under review. Company continued
to invest excess funds in unit trust
during the year which earned Rs 90
Mn income.
Subsidiary companies & jointly
controlled entities
UEL, OMCL, TVS Lanka, TVS AM &
UMPDL recorded profits before tax
during the year under review. TVS Auto
Parts recorded losses before tax. We
are currently working on strategies
and alternate business plans to
transform this loss making company
into a profitable entity. These include
the review and reassessment of loss
making product lines that have the
potential of delivering acceptable
bottom line results in the short to
medium term.
34 United Motors Lanka PLC | Annual Report 2013/14
5.3 Finance cost
Parent company (UML)
UML is in an enviable position of
having a net finance income position.
However there has been a reduction
in net finance income from Rs 370
Mn to Rs 341 Mn from 2013 to 2014.
Interest cost has increased from
Rs 18.7 Mn to Rs 39.4 Mn.
Finance income is earned from
interest income on surplus funds
invested in call deposits, unit trust
investments and loans to related
parties. Dividend income, profit on
sale of equity securities and foreign
exchange gains also contributed to
finance income.
We started the year when market rates
of interest which were around 14 %
- 16% and due to reasons mentioned
previously declined steadily through
the year and we ended 2013/14 with
rates in the region of 8% - 10 %.
Subsidiary Companies
Our group earned a net finance
income of Rs 172 Mn up from the
Rs 15 Mn earned in 2013. Unimo
Enterprises contribution was the
highest amongst the subsidiaries.
Increases in borrowings were evident
in OMCL, TVS Lanka, TVS Auto Parts
& TVS Automotives. The quarterly
Table 10
Company
Turnover (Rs. Mn)
GP (Rs. Mn)
Group
1st Qtr
2nd Qtr
3rd Qtr
4th Qtr
Total
1st Qtr
2nd Qtr
3rd Qtr
4th Qtr
Total
1,873.0
1,777.7
1,788.8
1,601.7
7,041.2
3,586.3
3,700.2
3,292.3
3,311.6
13,890.4
885.0
821.4
665.9
503.3
2,875.6
1,136.9
1,069.1
825.7
771.9
3,803.6
47.3%
46.2%
37.2%
31.4%
40.8%
31.7%
28.9%
25.1%
23.3%
27.4%
PBT (Rs. Mn)
684.1
555.2
429.0
315.8
1,984.1
783.6
652.5
239.4
504.8
2,180.3
PAT (Rs. Mn)
535.2
294.4
320.2
333.00
1,482.8
609.5
475.6
332.2
188.0
1,605.3
28.57%
16.56%
17.90%
20.79%
21.06%
17.00%
12.85%
10.09%
5.68%
11.57%
GP to Turnover
PAT to Turnover
Table 11
Company
Year
Group
Borrowings
Finance cost
Interest cover
Borrowings
Finance cost
Interest cover
Rs. Mn
Rs. Mn
(No. of times)
Rs. Mn
Rs. Mn
(No. of times)
2010/11
32.6
11.9
62.47
480.8
214.8
7.43
2011/12
1,399.7
11.3
161.88
1,726.2
105.5
31.26
2012/13
90.9
18.7
131.64
1,104.2
111.8
25.26
2013/14
241.5
39.4
51.30
1,357.8
128.0
18.03
results of the company and group are
shown in Table 10.
No changes were made to the
corporate tax rates.
Table 11 shows financial cost and
borrowings of the company and
group.
5.5 Working capital and liquidity
Parent Company (UML)
Currently only a very small amount
of current assets are funded by bank
borrowings. The past bank borrowings
were for by UML to fund inventory,
debtors, intercompany lending and
other current assets. This is a very
significant improvement from the Rs.
1.3 Bn borrowings in 2012.
5.4 Taxation
The budget for 2014 was presented by
His Excellency the President Mahinda
Rajapaksa in parliament on 21st
November 2013 with emphasis on
Sustaining economic growth
7.5% to 8% during the period
2014 to 2016.
Supporting local industrial and
agricultural production and
promoting service exports.
Strengthening the contribution
of state owned enterprises to
the economy.
Rs 763 Mn of investments in noncurrent investment has been funded
by internally generated funds.
We also purchased property and plant
in the year under review amounting to
Rs 753 Mn, of which Rs 530 Mn was
the investment in land. Details of the
land purchased are given elsewhere in
this report. We have plans to develop
all properties purchased. Further
Inventories increased during the year
under review as we had to stock all
our branch showrooms with vehicles
for display. Trade receivables did not
change during the year.
Liquidity & liquid assets over that of
the previous year are shown in
Table 12.
The profit made by both UEL & TVSL
and the turnaround of inventories
and debtors have contributed towards
a healthy position of group liquidity
during the year under review.
Table 12
Company
Improving revenue base and
compliance.
31-Mar-14
Group
31-Mar-13
31-Mar-14
31-Mar-13
Current Ratio
4.11:1
3.49:1
2.71:1
2.54:1
Quick Asset/
Ratio
1.79:1
1.96:1
1.12:1
1.19:1
3.63
1.50
16.77
14.98
Debt/Equity %
United Motors Lanka PLC | Annual Report 2013/14 35
Management review contd.
The total number of
ordinary shares in
issue is 67,267,084 at
present. Shareholders’
funds increased by
10% over that of
the previous year,
Shareholders’ funds
were Rs 6.6 Bn.
The change in the value of assets over
that of the previous year is shown in
Table 13.
5.6 Shareholders funds
The total number of ordinary shares
in issue is 67,267,084 at present.
Shareholders’ funds increased by
10% over that of the previous year,
Shareholders’ funds were Rs 6.6 Bn.
There was no revaluation of land
owned by the company during the year
under review,
TVS Lanka launched the 125cc Phoenix motor cycle aimed at the executive
sector. This is a motor cycle with many premium features.
Table 13
Company
Intangible assets
Property, plant & equipment
Investment property
Other investments - Non current
Defined benefit obligation plan asset
Deferred tax asset
Inventories
Trade & other receivables
Amounts due from related
parties
Current tax receivables
Group
31-Mar-14
31-Mar-13
Increase /
(Decrease)
31-Mar-14
31-Mar-13
Increase /
(Decrease)
Rs. Mn
Rs. Mn
%
Rs. Mn
Rs. Mn
%
4.0
6.9
(42.0)
22.5
26.3
(14.4)
2,536.7
1,839.7
37.9
2,947.4
2,211.3
33.3
151.4
151.8
(0.3)
59.9
59.9
-
1,109.7
1,559.5
(28.8)
762.8
1,212.6
(37.1)
107.1
96.8
10.6
112.2
100.0
12.2
42.0
35.7
17.6
64.9
61.5
5.5
2,140.5
1,536.0
39.4
4,047.1
3,422.0
18.3
951.6
693.9
37.1
1,880.7
1,616.9
16.3
24.8
41.6
(40.4)
19.7
21.2
(7.1)
-
-
-
5.4
-
100.0
Other investments - current
503.6
-
100.0
703.6
-
100.0
Cash and bank balances
162.3
1,224.8
(86.7)
238.6
1,373.4
(82.6)
7,733.7
7,186.7
7.6
10,864.8
10,105.1
7.5
Total assets
36 United Motors Lanka PLC | Annual Report 2013/14
Statement of value added and distributed
As shown in the statement of Value Added below, the group generated a value addition of Rs 7,788 Mn during the year
against Rs 8,009 Mn in 2012/13 which was shared with the various stakeholders and a portion was retained within
the group.
Group
For the year ended 31 March
Company
2014
Rs.’000
2013
Rs.’000
2014
Rs.’000
2013
Rs.’000
Sales
Other income
13,890,397
353,447
14,243,844
17,776,580
213,438
17,990,018
7,041,192
422,627
7,463,819
8,774,242
469,319
9,243,561
Less: cost of goods & services brought in
Value added
(6,455,584)
7,788,260
(9,980,576)
8,009,442
(2,729,527)
4,734,292
(4,528,594)
4,714,967
719,418
5,228,558
653,975
5,157,599
537,003
2,646,919
484,589
2,300,088
874,471
104,968
6,927,415
605,404
111,842
6,528,820
874,471
16,668
4,075,061
605,404
18,700
3,408,781
133,767
727,078
860,845
7,788,260
93,196
1,387,426
1,480,622
8,009,442
59,322
599,909
659,231
4,734,292
37,595
1,268,591
1,306,186
4,714,967
Distributed as follows:
To employees as remuneration &
premature retirement payments
To the government as taxes
To the providers of capital
-Dividends
-Interest on loans
Retained within the business
-Depreciation
-Reserves
Value added
2014
9%
2013
8%
Employees
11%
Employees
8%
Shareholders
Shareholders
Retained
9%
Retained
Lenders
18%
Government
68%
1%
Lenders
Government
65%
1%
United Motors Lanka PLC | Annual Report 2013/14 37
Distributor network
Ampara District
Ampara
Akkaraipattu
Dehiattakandiya
Hingurana
Inginiyagala
Uhana
Padiyatalawa
Mahaoya
Kalmunai
Pottuvil
Samanturai
Jaffna
Kilinochchi
Mullaitivu
Vavuniya
Mannar
Trincomalee
Anuradhapura
Polonnaruwa
Puttalam
Batticoloa
Kurunegala
Matale
Ampara
Kandy
Gampaha
Kegalla
Nuwara Eliya
Badulla
Colombo
Monaragala
Kalutara
Ratnapura
Hambantota
Galle
Matara
● Spare Parts
Valvoline
Yokohama Tyres
† Service Dealers
38 United Motors Lanka PLC | Annual Report 2013/14
▲ Certified Service Points
○ TVS Sales Dealers
◄ Spare Parts Dealers
■ Tyres
●◄▲
◄
○◄▲
○▲
◄▲
▲
◄▲
○◄▲
▲◄
◄▲○
Nintavur
▲
Thirukovil
▲
Gonagolla
Anuradhapura District
Anuradhapura
Kekirawa
Horowpothana
Eppawela
Nochchiyagama
Thambuttegama
Kebithigollewa
Galenbidunuwewa
Thirapane
Saliyawewa
Vilachchiya
Madawachchiya
Rambewa
Galnewa
Kalaoya
Thalawa
Mihintale
Palugaswewa
Padaviya
Siripura
Maho
Hiripitiya
Rajanganaya
Bulnewa
▲
Seppukulama
Kahatagasdigiliya
Badulla District
Badulla
Welimada
Bandarawela
Mahiyanganaya
Siripura
Keppitipola
Diyatalawa
Passara
Aralaganwila
Ettampitiya
Hindagoda
Badalkumbura
Heliela
Batticaloa District
Batticaloa
Akkaraipathu
Pothuvil
Oddamavadi
Kalawanchikudi
Ariyampathi
Valachchenei
Vantharamoolai
Colombo District
Colombo
Homagama
Avissawella
Malabe
Moratuwa
Padukka
●■◄▲○
◄▲○
▲◄○
▲○
▲◄○
■◄▲○
◄▲○
◄ ▲○
◄▲○
○
▲
◄▲
▲
▲
◄▲
▲
◄○
▲
▲
○
◄▲
▲○
†●○◄▲
○◄▲
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Battaramulla
Borella
Athurugiriya
Maharagama
Nawala
Kaduwela
Thalangama North
Dehiwela
Meegoda
Boralesgamuwa
Polgasovita
Peliyagoda
Rajagiriya
Kottawa
Narahenpita
Kotikawaththa
Panagoda
Madapatha
Galle District
Aluthgama
Galle
Bentota
Batapola
Udugama
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Uragasmanhandiya
Ahangama
Pitigala
Hikkaduwa
Yakkalamulla
Gonapinuwala
Elpitiya
Neluwa
Thalgaswila
Udugama
Imaduwa
Kottawagama
Induruwa
Dodanduwa
Ethkadura
Baddegama
Ahungalla
Nindana
Habaraduwa
Gampaha District
Wattala
Gampaha
Kadawatha
Mirigama
Pasyala
Kiridiwela
Delgoda
Kelaniya
Kadawatha
Yakkala
Weliweriya
Negombo
Ganemulla
Welisara
Nittambuwa
Ragama
Seeduwa
Minuwangoda
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Pugoda
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Katana
Ja-Ela
Mudungoda
Katunayake
Kalagedihena
Maradagahamula
Kochchikade
Biyagama
Dompe
Makola
Malwana
Hambantota District
Hambantota
Tangalle
Middeniya
Beliatta
Weeraketiya
Angunukolapelessa
Tissamaharama
Ambalantota
Suriyawewa
Katharagama
Katuwana
Ambilipitiya
Weeravila
Walasmulla
Jaffna District
Jaffna
Mannippai
Rambewa
Point Pedro
Chavakachcheri
Neervely
Chunnakam
Kondavila
Neliadi
Kalutara District
Kalutara
Agalawatte
Horana
Panadura
Beruwala
Matugama
Wadduwa
Bandaragama
Bulathsinghala
Ingiriya
Welagedera
Meegahathenna
Dodangoda
Dharga Town
Payagala
Badureliya
Kandy District
Kandy
Mulgampola
Gampola
Pilimatalawa
Teldeniya
Katugastota
Kiribathkumbura
Kegalle
Werellagama
Pujapitiya
Harispaththuwa
Kundasale
Ambathane
Galagedara
Muruthalawa
Rikiligaskada
Digana
Kadugennawa
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Peradeniya
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Kegalle
Rambukkana
Warakapola
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Kurunegala
Wariyapola
Maho
Hettipola
Ambanpola
Polgahawela
Giriulla
Nikaweratiya
Narammala
Kuliyapitiya
Reedegama
Yakwila
Wellawa
Hiripitiya
Galagamuwa
Meegalwewa
Melsiripura
Bingiriya
Polpithigama
Pannala
Bandara Koswatta
Dummalasuriya
Alawwa
Kohilagedara
Weuda
Padeniya
Maspotha
Ibbagamuwa
Galgamuwa
Mannar District
Mannar
Matale District
Matale
Galawela
Dambulla
Wilgamuwa
Naula
Thalakiriyagama
Matara District
Matara
Weligama
Dickwella
Akuressa
Kamburupitiya
Hakmana
Morawaka
Dondara
Kekanadura
Denipitya
Monaragala District
Monaragala
Buttala
Bibile
Wellawaya
Sevanagala
Medagama
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Mullaitivu
Nuwara Eliya
Nuwara Eliya
Dickoya
Hewaeliya
Hatton
Nawalapitiya
Talawakele
Nanuoya
Ginigathhena
Udupussellawa
Kothmale
Polonnaruwa District
Polonnaruwa
Hingurakgoda
Medirigiriya
Jayanthipura
Aralaganwila
Minneriya
Sevanapitiya
Kaduruwela
Pelatiyawa
Gemunupura
Puttlam District
Puttlam
Mahawewa
Kalpitiya
Marawila
Anamaduwa
Wennappuwa
Chilaw
Madurankuliya
Dankotuwa
Udappuwa
Madampe
Nattandiya
Nochchiyagama
Mawathagama
Mahawela
Nawagathegama
Mugunuwatawana
Ratnapura District
Ratnapura
Balangoda
Pelmadulla
Embilipitiya
Kalawana
Opanayake
Nivithigala
Padalangala
Eheliyagoda
Godakawela
Kuruwita
Trincomalee District
Trincomalee
Kinniya
Muttur
Kanthale
Kinniya-2
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Vavuniya
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United Motors Lanka PLC | Annual Report 2013/14 39
Sustainability review
WITH THE STRONG BRANDS WE REPRESENT, GOOD GOVERNANCE PRACTICES AND A DYNAMIC TEAM
WITH A PERFORMANCE DRIVEN CULTURE, UML IS WELL POSITIONED TO BE A CUSTOMER CENTRIC
ORGANISATION ADDING VALUE TO ALL ITS STAKEHOLDERS
During the current year, we continued
to strengthen our business model for
long term sustainability by investing in
environmentally sustainable initiatives
and products, and by meeting our
social commitments and building a
strong partnership with our business
partners. We also continued to build
on our human resource base, which
we believe is a competitive advantage
and is key to sustaining our growth
strategy of building a customer
centric organization to create
stakeholder value. We have placed
the customer at the heart of our
business and we continue to improve
our internal systems and service
delivery, to ensure a customer focused
organisation that delivers beyond
customer expectations.
We continued to strengthen our business
model for long term sustainability by investing
in environmentally sustainable initiatives and
products, and by meeting our social commitments
and building a strong partnership with our
business partners.
Our stakeholders
It is of paramount importance to have
an understanding of all stakeholder
needs and to be responsive to their
expectations, to ensure sustainability
of operations in achieving
performance objectives. The Company
continuously monitors stakeholder
expectations against delivery, and
mitigating strategies are put in place
where required.
UML awarded 100 scholarships for the children of fallen and disabled war
heroes of the Sri Lanka Army Special Forces regiment to support their
efforts, thus providing them with financial assistance.
Our sustainability strategies
Our sustainability strategy is built on
the concept that any business solution
must strike a sound balance between
economic, social and environmental
impacts in order to be sustainable,
40 United Motors Lanka PLC | Annual Report 2013/14
1
Customers
2
Shareholders
3
Employees
4
Business Partners
5
Community
6
Environment
7
Government and regulators
8
Lenders
Sustainability
Planning
for long term
success
Our Sustainability Strategies
Distribution of scholarships to
students of Wijeyaba Vidyalaya,
Colombo 14.
1
Improve customer service standards through service excellence.
2
Positive economic value creation through business, product
diversification and through our sustainability initiatives.
3
Improve employee satisfaction levels by understanding employee
expectations, and be the employer of choice by providing a safe, secure,
working environment for employees whose rights are fully safeguarded
and who have equal opportunity to realize their full potential.
4
Aligning businesses partners expectations with the company’s objectives
and also seek new products based on our core competencies and
emerging opportunities thereby growing our product portfolio by adding
reputed business partners as likes of MMC and Daimler who supports
our sustainability initiatives with eco-friendly vehicles.
5
Implement programmes which are aligned with the Company’s long
term strategy of uplifting education and health facilities and building
strong community relationships and enhancing quality of life in the
communities we operate through CSR initiatives.
6
Introduce environmentally friendly vehicles to the market and implement
policies and procedures to minimize the impact on the environment.
7
Ensure compliance with laws and regulations of the country and
contribute to government development objectives.
8
Obtain best offerings and service levels by creating a mutually satisfying
relationship with lenders and abide by covenants.
9
Strive to conduct activities by adopting Good Governance and best
corporate practices at all times.
The methods of engagement with the
key stakeholders are discussed below:
Our Customers
Our Shareholders
Our Employees
Business partners
Community
Environment
Government and regulators
Lenders
Our Customers
Customers play an important role
in our journey towards sustainable
performance and we are well aware
of the importance of placing our
customers expectation at the forefront
of our decision making process.
United Motors Lanka PLC | Annual Report 2013/14 41
Sustainability review contd.
Service excellence model
Profiling
Customer
Engagement
Interaction
Retention
Recruitment
Staff
Development
Reward
Market environment
Customer feedback
Staff feedback
Train
Service
Excellence
Customer
insights
Industry standards
Standards
Process
improvements
Streamline
Implement
Analyse
Upgrading
facilities
Standardise
Invest
Our customer service model
Engaging our customers
Our approach to customers is
based on a service excellence model
comprising customer insights,
customer retention and staff soft skills
development, process streamlining
and upgrading facilities to cater to
customer needs.
During the year, we ensured that our
databases are updated with complete
and accurate data. This enabled us
to continuously communicate with
our customers to gather feedback,
new product offerings and also to
remind them on their services due
and periodic vehicle maintenance.
We respect customer privacy and are
wholly committed to protect customer
data.
Customer insights are gathered
by analysing industry standards,
customer feedback, staff feedback
and the market environment, to
develop in-depth insights on customer
requirements and demand trends.
Customer profiling, customer
interactions and customer retention
concepts ensure that our customers
are individually identified and
rewarded, to develop relationships.
This also focuses on interaction
via staff, dealers and personalized
communications material, to ensure
that we provide a high quality
experience to our customers.
Currently we cater to a large
number of businesses, government
organisations and individual
customers through our Head office,
branches and dealer network. Our
dealer network is wide spread across
the country.
Any customer who has not visited
our workshop within the year are
called and visited by our staff to
look into and identify any grievances
or issues, to reason out and reestablish the relationship. Any issues
identified are looked into and actions
42 United Motors Lanka PLC | Annual Report 2013/14
taken to bridge service gaps and to
deliver a better service experience to
customers. Measures are also being
taken to expand workshop capacity
and introduce advanced auto detailing
products to provide high quality
and exclusive auto care and vehicle
grooming solutions to customers.
Further, customer interactions are
continually monitored and customers
are analysed based on revenue,
number of vehicles owned and
number of visits to our workshops for
after sales services. During the year,
our workshop teams generated 63,854
jobs covering 21,107 vehicles owned
by 16,873 customers.
Frequent customer engagements are
vital for relationship building. The
process of customer engagement
is through customer handling staff,
dealer network, electronic and social
media, such as Facebook, company
website and dedicated emails. Further,
feedback boxes kept in our customer
waiting areas, dedicated hotlines
and outbound call surveys provide us
feedback on customer service levels
throughout the organization.
Our Facebook pages
build awareness on its application.
This process has resulted in an ongoing awareness creation that includes
all grades of employees, contributing
significantly towards improving service
levels in the organization over the
years.
Since its launch, this index has
improved over the years as shown
in the graph. By September 2013,
the overall index had improved to
96%. Hence the initial yellow colour
badge was changed to a green colour,
symbolising the improvements
in customer service level and in
communicating this achievement to all
our employees.
We continuously strive to improve our
customer service levels and minimize
complaints by serving our customers
Promptly, Accurately and Caringly, as
per our customer service motto.
Customer loyalty programme
In recognition of our valued
customers, our Privilege Circle
loyalty programme adds value to our
customers through the various offers
and promotions. The programme
provides discount benefits through
both the United Motors group and
also from external partners in different
business sectors.
Customer service initiatives
Over the years we have been realigning
the company towards a customer
oriented culture and improving
service levels for greater customer
satisfaction. In order to uplift
customer service levels, the Api United
initiative was launched on the 2nd
January 2012, with an initial survey
indicating a customer service index of
42%.
Further, customer service
posters, group emails and various
communications were developed and
circulated to our employees from time
to time and employees were educated
on best practices, cross functional
activities and the importance of
customer service excellence.
Mystery customer and feedback
surveys were carried out to evaluate
our customer handling staff on their
customer service skills. This year 31
staff members were recognized for
obtaining high scores in these surveys.
Customer service index
Achievement
Target
100%
86%
80%
75%
75%
The Api United concept is guided by
an internally developed Customer Care
Code, which is implemented through
Cross Functional Teams that educate
staff on the code of conduct, and
90%
85%
96%
90%
96%
95%
80%
60%
40%
42%
20%
Dec-11 Mar-12 Sep-12
Mar-13
Sep 13 Sep 13
United Motors Lanka PLC | Annual Report 2013/14 43
Sustainability review contd.
Managing customer complaints
The complaint management process
has been designed to capture
customer grievances. The customer
care team resolves these complaints
in order to provide a quick solution
to customers. Further, preventive
measures are taken where required to
avoid, or minimize repetitions.
Way forward
We will strive to improve our customer
service initiatives, internal systems
and service delivery, to be a customer
centric organization that delivers
beyond customer expectations.
Our Shareholders
Recognition of employees who excelled in customer service.
Upgrading our facilities to serve
our customers better
caller line identification solutions have
been put in place.
In delivering high quality customer
service, the facilities pay a key role.
During the year, we have upgraded
the telephone system to improve
communication. This facilitates the
requirement in the Customer Code
to answer calls within three rings.
Further, automated answering and
Our Orugodawatte workshop complex
main customer waiting area has been
upgraded. A kids play area also has
been included among other facilities
upgraded , to provide a comfortable
and relaxing stay for our customers
until their vehicles are repaired.
Yes
START
Complaint Solved
Complaining
Customer
Lodge in Complaint
Portal
Acknowledgement of
Complaint
Update Customer/
Give Solution
Check/Follow up on
Issue/Problem
Assess Severity of
Complaint
No
Close
Complaints
Over the last decade, we have
experienced a heightened interest in
sustainability and Corporate Social
Responsibility (CSR). More and more
investors are becoming socially
responsible, taking companies’
environmental, social and governance
standards into account in their
investment decisions. In the light
of this heightened interest, it is
more important for companies to
understand the relationship between
sustainability and shareholder
value. The Board of Directors of
Appraisal or
Prevention Activities
Required
No
END
44 United Motors Lanka PLC | Annual Report 2013/14
Yes
Open for Review
UML recognise their stewardship
responsibility towards the company
shareholders.
It can be seen from the graphs
that shareholders’ funds, market
capitalisation, dividends per share and
net assets per share have increased
over the years. Our assets base has
accumulated steadfastly over the years
and provides a strong foundation
which ensures that the Company is
able to withstand the competitive
business environment. Our prudent
corporate strategies have resulted
in the delivery of a consistent return
on capital employed in the business,
thereby enhancing shareholder wealth.
Over the years, UML had delivered
on its promise to the shareholders
by ensuring a consistent returns on
their investments through capital
appreciation and dividends providing
one of the most consistent and
dependable investment opportunities
to investors.
We believe in conceptualising and
implementing long term strategies
aimed at ensuring a consistently high
return on capital employed, and this
will be our focus in the future.
Communications with
shareholders
The Company is committed to
enhance shareholder relationships
through regular communications
with both individual and institutional
shareholders with balanced and
understandable information about
the company and performance. The
Company strives to ensure that all
shareholders have timely access to all
publicly available information of the
Company.
Shareholder communication policy
promotes effective communication
with shareholders to enable them to
engage actively with the Company and
exercise their rights as shareholders in
an informed manner.
Enhanced shareholder value through increased return on investment
2012
2013
2014
Shareholder funds
5,816,569
7,370,627
8,097,177
Market capitalisation
7,264,836
6,457,632
8,273,841
6.25
9.00
13.00
86.47
109.57
120.37
Dividends per share
Net assets per share
The Annual General Meetings and
other General Meetings of the
Company is the primary forum for
communication with shareholders
and for shareholder participation. The
Company encourages shareholders to
participate in Annual General Meetings/
other General Meetings physically. If
the shareholder is unable to attend
they can appoint proxies to attend and
vote at such meetings for and on their
behalf. Notices of General Meetings,
accompanying papers, circulars and
required documents are dispatched
to shareholders by post within the
prescribed time. At the shareholders’
meetings the Board of Directors,
Members of the Board Sub committees,
and Auditors, where needed, are
available to provide clarification to
shareholders if necessary.
The quarterly financial statements
and annual reports are produced in
accordance with the Listing Rules
of the Colombo Stock Exchange and
other applicable laws and regulations.
From time to time, the Company
communicates other information to
Shareholders by way of Company
announcement and/or circulars,
in compliance with regulatory
requirements.
The Company’s website (www.
unitedmotors.lk) provides information
on the Company, including the annual
reports. In addition to the annual
reports, relevant press releases
and announcements are also made
available on the Company’s website to
facilitate communication between all
stakeholders of the company.
Shareholders may, at any time,
direct questions, request for publicly
available information and provide
comments and suggestions to
Directors or Management of the
Company. Such questions, requests
and comments can be addressed to
the Company Secretary by post to
100, Hyde Park Corner, Colombo-2 or
by email to ir@unitedmotors.lk
Governance
The Board of Directors is responsible
to shareholders for creating and
delivering sustainable shareholder
value and is conscious that a strong
Shareholder funds and market capitalisation
(Rs. ‘000)
Shareholder funds
Market capitalisation
10,000,000
8,000,000
6,000,000
4,000,000
2,000,000
2011/12
2012/13
2013/14
United Motors Lanka PLC | Annual Report 2013/14 45
Sustainability review contd.
The strength of United Motors lies with the
skills and expertise of our employees. We are
aware that, to ensure sustainable growth, we
must create the right culture through talented,
creative, result oriented employees.
Strength of our team
Understanding the importance of
helping one another.
corporate governance framework is
critical to maintaining investor trust
and business integrity.
The strength of United Motors lies
with the skills and expertise of our
employees. We are aware that, to
ensure sustainable growth, we must
create the right culture through
talented, creative, result oriented
employees. We also understand that
our employees have to be at their
best to add value to our customers.
We firmly believe that employee
engagement is crucial in achieving our
objectives.
Recruitment
During the year, the company
reviewed its governance structures
in the context of the revised Code
of Best Practice on Corporate
Governance issued jointly by the
Institute of Chartered Accountants
of Sri Lanka and the Securities and
Exchange Commission of Sri Lanka.
We also complied with the rules on
corporate governance published by
the Colombo Stock Exchange. The
level of compliance is discussed under
Corporate Governance section.
Our recruitment philosophy is to
attract employees with appropriate
knowledge, skills, values and attitudes
that would be in line with the culture
and goals of the organization whilst
catering to growth and providing
opportunities for such individuals .
UML employed a highly motivated
team of 609 employees who serve
in Head Office and in the Branch
Network island-wide to deliver results
on our defined strategic goals, in line
with our final objective of building a
customer centric organization. During
the current year we continued to
strengthen our human resources as
a core element of this objective and
expanded our team by 47 members.
We also employed 82 employees on
casual /fixed term contracts and
granted on the job training to 168
trainees from several Automobile
Institutes.
Out of our total staff strength, 81%
is based in our Head office and the
workshop at Orugodawatte.
Branch
Number of
employees
Kandy
Nuwara Eliya
23
4
Matara
21
Kurunegala
17
Jaffna
14
Anuradhapura
27
Ratnapura
12
Colombo
491
Total
609
Equal opportunity employer
Dividends and net assets per share
(Rs. ‘000)
Dividends per share
Net assets per share
150
120
90
60
30
2011/12
2012/13
2013/14
46 United Motors Lanka PLC | Annual Report 2013/14
The foundation of the human
resources philosophy of our company
is to be an equal opportunity
employer. The Company does not
discriminate on the basis of gender,
race, nationality, age, social origin,
disability, religion, or any other basis
the performance-centric culture,
which has been a cornerstone of the
Company’s success and ensures that
employees performing at the same
level will be treated alike while there
would be clear differentiation as
between those performing at different
levels.
Male and female composition
Number of male employees
9%
Number of female employees
91%
Number of employees
4% 6%
Senior management
Managers
Executives
Non executives
31%
Our management team at a training programme being
conducted at head office.
59%
Number of employees
Senior Management
24
Managers
35
Executives
189
Non executives
361
Total
609
Employee analysis by age
2%
Above 51
19%
41-50
31-40
Age
Number of employees
Above 51
21-30
41%
13%
114
41-50
82
31-40
150
21-30
250
Below 20
Below 20
25%
13
Total
609
Employees service analysis
Period of service
above 20 years
Number of employees
113
15-20 years
6
10-15 years
14
6-10 years
63
below 6 years
413
Total
609
Above 20 years
19%
15-20 years
3%
10%
10-15 years
6-10 years
68%
United Motors Lanka PLC | Annual Report 2013/14 47
Sustainability review contd.
Training and development
Category
Levels
Managers & above
Total training hours
2013/14
1,175
Executives
1542
9,720
5969
Total
15,995
8,427
Local
15,372
7,571
Foreign
Nature of training
916
5,100
Non Executives
Type of training
Total training hours
2012/13
Technical
Non- Technical
623
856
5,224
3,248
10,771
5,179
Comparison of training hours
in 2012/13 & 2013/14
2012/13
2013/14
20,000
15,000
10,000
Diversity
As an equal opportunity employer
and we have a team that is diverse
in terms of gender and age. Overall
female participation in our team is
9.03% which is higher than last year.
There is female participation at all
levels of management although the
participation rate declines in the
higher levels of management.
Our team includes employees whose
ages vary from 19 – 21 years, to those
who are above 55 years. The majority
of the employees, 41% are in the
21 - 30 years category, which shows
a young and dynamic workforce with
strong growth potential.
We are geared to meet varying
expectations of our stakeholders, with
a well experienced employee base. Our
employee service analysis shows that
19% of our staff has over 20 years of
NonTechnical
Technical
Foreign
Local
NonExecutives
Learning the value of team work
Executives
Managers
& above
5,000
service with the Company, indicating
high employee retention and employee
satisfaction.
company level competencies matrix is
developed and are used as a source
for training and development.
Performance Management
Participatory productivity
Management commitment to
employee development, the use of
efficient systems and processes
combined with a performance
management system that measures
achievement of key performance
indicators (KPI) are the key drivers of
employee productivity in our company.
We have focused on productivity
improvements to enhance efficiency,
reduce costs and wastage and improve
customer satisfaction. A combination
of training, productivity initiatives
and reward schemes have been the
enablers to uplift overall operational
efficiency of the Company. During
the year we continued conducting
productivity awareness programs,
training on quality circles, 5S and
Kaizan concepts and the divisional
reward scheme at our workshops.
These efforts have resulted in higher
productivity levels and greater
efficiencies. The 13 quality circles in
our eight workshops enabled us to
improve existing processes and reduce
time and costs. We also conducted
The key performance indicators of
employees are linked to the divisional
and organizational goals. The annual
performance evaluation consist of
three areas, KPI represents 70% ,
20% is allocated to competencies and
10% is based on the customer care
rating of the individual/division. As
part of the performance management
initiative, individual, departmental and
48 United Motors Lanka PLC | Annual Report 2013/14
OUR ANNUAL TRAINING PLAN IS DESIGNED BASED ON THE RESULTS OF THE TRAINING NEED
ANALYSIS, WHICH INCLUDES COMPETENCY ASSESSMENTS, CUSTOMER EXPECTATIONS AND
DEVELOPMENTS IN THE INDUSTRY.
detailed work and time studies to
analyse processes and develop
leaner more efficient systems. All
these initiatives have contributed in
increasing individual contribution from
Rs 57,939 to Rs 77,750 by the end of
the financial year.
Training and development
Our training and development plan
encompasses technical and soft skills
training, leadership development
on the job training and experiential
learning. The annual training plan is
designed based on the results of the
training need analysis, which includes
competency assessments, customer
expectations and developments in
the industry. This exercise is carried
out in collaboration with the Heads
of Departments. This forms the blue
print for training and development
activity for the coming year and the
achievement of outcome is assessed
to monitor progress in line with the
plan.
On average we have spent nearly 20
training hours for managers and above
category, 27 hours for executives and
non-executives staff.
The M-Step programme, which
is a special technical training for
workshop employees, conducted by
internal resource persons, provides
a great opportunity for our workshop
employees to enhance their knowledge
on vehicles systems. During the year,
15 employees have successfully
completed three programmes. M-step
programme evaluations are carried
out periodically and monitored
to ensure that the technical staff
competencies are up to the standard
level.
Our staff at outward bound training
We continued to invest in identifying
and meeting training needs that
directly contribute towards best
service standards, which have turned
into a competitive advantage for the
Company. As part of this initiative,36
programmes on productivity
awareness, 5S, quality circles and
Kaizan concepts were conducted
during the year.
We have also conducted separate
trainings programmes to cover
functional areas such as HR, Sales,
IT (Microsoft office) and Taxation etc.
Several programmes on personality
development and grooming were also
conducted to executive staff across
the company.
Outward bound training can be
considered a major event in our
organization, which encourage
employees to have experience in team
building activities, building trust,
commitment in what they do, and to
improve strength and innovativeness.
It directly impacts on employee
satisfaction level and their work-life
balance. During this year we have
conducted five programmes for 207
staff members.
Succession planning and career
development
As part of our strategy for long
term continuity, we have built a
succession pipeline identifying key
positions and commenced a system
to groom and develop successors
United Motors Lanka PLC | Annual Report 2013/14 49
Sustainability review contd.
improvement teams and quality
circles.
Employee satisfaction
As a means of measuring employee
motivation and engagement
we conduct internal surveys on
Organisation Health Index (OHI)
annually. The OHI has shown
consistent growth since its
introduction in 2011. In 2013/2014,
OHI increased to 75% from 72% in
2012/13.
Annual pirith ceremony at our Orugodawatte workshop
for these positions. In addition, we
have developed competency mapping
and personal development plans
that provide growth opportunities
for upward mobility and career
enhancement.
Rewards and recognition
The remuneration policy of UML is
designed to attract, motivate and
retain staff with the appropriate
professional, managerial and
operational expertise to achieve the
objectives of the company. Our reward
and recognition system, which is
linked to employee performance, has
motivated employees to strive for
growth, which in turn improved the
operational efficiency and improved
their contribution to the company
bottom line.
In addition to the annual increments
based on the individual appraisal
rating, a customary bonus of one
month and a variable performance
bonus of six months were also paid
to all employees. A monthly divisional
reward scheme at our workshops, that
recognize exceptional performance,
has resulted in higher productivity
levels and greater efficiencies. During
the year 23 sales staff were awarded
company sponsored foreign trips for
their excellent annual performance.
As part of our employee rewards
system, we recognize employees who
have served the company for 25 years
with gold coins, as a gesture of our
appreciation
Survey results are taken up separately
with the heads of department and
divisional staff. The outcome of the
survey is a key results area for heads
of department, functional managers
and the team leaders to improve areas
that need attention in their respective
areas of responsibility.
The satisfaction in sub index,
employee recognition, increased
by 2%, while the relationship with
superiors sub index increased by
5% and compensation and career
development also increased by 3%
compared to last year. 86% of the
employees have recommended this
company as a good place to work.
Employee benefits / welfare
Relationship with employees
At UML, we maintain close
relationship among divisions in order
to achieve the required outcome as
one team. We maintain an open- door
communication policy and have
created more open and transparent
channels of employee communication
and engagement. The regular dialogue
between employees and management
foster exchange of views and reduce
the grievances of employees.
To enhance the motivation of our
team members, we have provided
both formal and informal methods
of engagement for our employees.
Therefore, we have gone beyond the
norm in creating a participatory work
environment by introducing team
based approaches, such as continuous
50 United Motors Lanka PLC | Annual Report 2013/14
For employees to network and build
team spirit within the organization,
we conducted a number of employee
events. A pirith chanting ceremony
was held at Orugodawatte. The
employees enjoyed themselves at
the annual get together at Laya
Beach Wadduwa. The employees also
conducted a blood donation campaign
to contribute to the national health
system. To support employee welfare
we also organized a dental clinic for
all our employees. As part of our
investment in employee welfare we
upgraded the employee facilities.
In addition to the medical benefits
and personal accidents insurance
enjoyed by all employees, a special
health cover for critical illness was
introduced in recent years.
In compliance with the payment
of Gratuity Act No 12 of 1983, all
permanent employees who complete
five years of uninterrupted service
are entitled to receive a retirement
benefit obligation amounting to
half a month’s basic salary for each
year served. The defined benefit
contribution liability is valued by
professional valuers and is externally
funded. The total defined benefit
obligation of the Company as at 31
March 2014 amounted to Rs 150
million, out of which Rs 107 million
has been invested in a planned asset.
We extend the concept of employee
satisfaction beyond the immediate
workplace and reach out to families of
employees and also provide employee
interaction opportunities. As part of
our employee welfare and support
system, we recognize achievements
of children of employees and we
encourage employees and their
children through educational support.
We believe this holistic support system
motivates employees and builds
loyalty towards the Company. For this
purpose, we have established three
scholarships for children of employees
that recognizes achievements at
the Grade 5 national scholarship,
the Ordinary Levels (O/L) and the
Advanced Level (A/L) examinations.
During the current year we awarded
Tikiri” Scholarships for 3 children of
UML group employees who passed
the grade five scholarships. Through
our “Navum” Scholarships we granted
scholarships for 11 children of UML
employees who passed the GCE O/L
with highest results, and we awarded
“Yovun” Scholarships for 7 children of
our employees who did exceptionally
well at the GCE A/L. In addition, we
also distributed book vouchers to
the value of Rs 1,000 each, among
285 children of staff to support their
educational development.
Health and safety
We follow national guidelines on
workplace health and safety directives.
These directives set out general
principles for the protection of the
As part of our employee welfare and support
system, we recognise achievements of children of
employees and we encourage employees and their
children through educational support. We believe
this holistic support system motivates employees
and builds loyalty towards the Company.
workers occupational health and
safety. At our workshop, we have
initiated a range of activities related
to health and safety. We provide safety
equipment/tools to all our workshop
employees. We have also provided
our employees with other facilities in
compliance with accepted health and
safety measures.
Industrial relations and human
rights
We aim to ensure that our people
work under conditions that meet all
labour standards and laws of the
country. We only employ people above
legal working age and our human
resources framework aims to provide
just and favourable conditions for all
our employees. We are committed
to respecting and upholding human
rights in all aspect of our operations
and within our sphere of influence.
The company also adheres to labour
laws and regulations as stipulated by
the local authorities.
Code of conduct, ethics and anticorruption behaviour
In addition to the employee handbook
which details the expected employee
behaviour, a code of conduct
and ethics is in place to provide
a reference point and guide for
corporate conduct and behaviour
within our company. It is the
fundamental policy of UML that all
employees observe and comply with
the laws and regulations applicable
to our business and that we operate
and act in a manner which promotes
a high standard of business integrity.
All employees are expected to know,
understand and follow this code
of ethics and standards in their
respective areas of work.
Retention
United Motors prides itself on its
high retention rates. We believe this is
due to a combination of factors that
increase employee satisfaction. This
includes a framework of policies that
promote career progression, personal
development , diversity, meritocracy
and recognition, a stimulating and
ethical environment, high standard
of professionalism and rewards and
benefits that have been discussed
above.
In addition to the statutory benefits,
we provide a number of benefits to
our permanent staff. These include
performance incentive bonus, loan
facilities on special interest rates ,
a comprehensive medical scheme,
reimbursement of membership in
professional institutes etc.
Our Business Partners
Nurturing our relationship with our
business partners
Our relationship with business
partners has been nurtured over
the years. This has been in line with
our vision of diversification, and our
strategy of entering new business
segments within the automobile
industry. Since inception as the sole
distributor for Mitsubishi vehicles,
today, we have developed a diversified
portfolio which serves a widespread
market across Sri Lanka. UML boasts
a rich heritage of stability, corporate
governance and dynamism. It has
been selected by global partners to
represent brands such as Mitsubishi
passenger and Daimler Fuso
commercial vehicles from Japan,
Perodua compact cars from Malaysia,
JMC commercial vehicles, DFSK mini
United Motors Lanka PLC | Annual Report 2013/14 51
Sustainability review contd.
OUR BUSINESS PARTNERS REPRESENTING LEADING GLOBAL BRANDS, MARKET SOME OF THE MOST
RESPONSIBLE PRODUCTS IN THEIR RESPECTIVE CATEGORIES.
Blood donation campaign.
trucks, Morris Garage (MG) cars and
Zotye compact SUVs from China,
Yokohama tyres from Japan, JK
tyres and Mak lubricants from India,
Valvoline lubricants and Eagle One car
care products from the USA, along
with TVS two-wheelers and threewheelers from India.
In order to retain our business
partners we have stretched ourselves
to meet our business partners’
‘expectations in terms of meeting
sales targets, making the product
available at all times with easy access
to customers, after sales service
standards, attracting new customers
and maintaining existing customers.
Over the years, we have invested
substantially throughout the island
in upgrading our service facilities to
the standards set by the principals.
We ensure that our technical staff are
constantly updated on technological
developments by giving them required
foreign training.
Annual staff get together at Laya Beach Wadduwa.
Growing the market share of our
business partners
We have a substantial market share in
many market segments and we have
been able to grow our market share.
Increasing our market share requires
continuous improvement to our
products and services. We constantly
seek new products based on our
core competencies and emerging
opportunities. We grow our product
portfolio by adding new business
partners. UML’s multi-brand strategy
has enabled us to offer a wider choice
to customers at different price points,
and strengthened its position as a
total transportation solutions provider,
while also helping the company to
spread its risks in the highly volatile
market in which it operates.
52 United Motors Lanka PLC | Annual Report 2013/14
Product responsibility
Our business partners representing
leading global brands, market some
of the most responsible products in
their respective categories. We are
committed to keeping abreast with
developments and offer the latest
products of our principals to the local
market. Our product responsibility
lies with the sales and after sales.
As much as we are committed to
generate sales, we have always
been concerned about after sales
performance as well.
Our business partners and brands we
represent are given on the next page;
Mitsubishi Motors Corporation, Japan (MMC)
The history of Mitsubishi Motors Corporation dates back to
1870, the year that the Tsukumo Shokai shipping company
was founded. Mitsubishi Heavy - Industries can trace its
origins to Tsukumo Shokai, which launched the “Mitsubishi
Model-A” project in 1917. Mitsubishi Motors became
an independent Company in 1970 when the automobile
division was spun off from Mitsubishi Heavy - Industries.
In 2003 the Company was reborn as the new Mitsubishi
Motors, a manufacturer that specialised in passenger cars.
MMC has production facilities in 19 countries, and its
vehicles are sold and serviced in more than 170 countries
worldwide.
Mitsubishi Fuso Truck & Bus Corporation, Japan
(MFTBC)
Mitsubishi Fuso’s history dates back to 1932 and the
FUSO B46 Bus. MFTBC is a fully consolidated business
unit of Daimler Chrysler, the world’s largest commercial
vehicle manufacturer. As a member of the Company’s
Truck Group, Mitsubishi FUSO takes its place alongside
Mercedes-Benz and Freightliner, two of the world’s leading
truck brands. Mitsubishi FUSO plays a crucial role as the
group’s Asian pillar and centre for light-duty trucks and
hybrid technology, enabling a global leadership position in
these areas. Mitsubishi FUSO’s technology development
is focused on three inter-related areas - fuel efficiency,
environmental sustainability and safety.
Valvoline, USA
Valvoline, a division of Ashland Inc., which started its
lubricant operation in 1866, serves more than 140
countries worldwide and is a leading marketer, distributor
and producer of quality branded automotive and industrial
products and services. Products include automotive
lubricants, transmission fluids, gear oils, hydraulic
lubricants, automotive chemicals, speciality products,
greases and cooling system products. It became an active
member of the Fortune 500 Company listing by achieving
operating revenue of US$ 8 billion. Presently they operate
30 fully owned blending plants in various parts of the
world.
Valvoline also offers Eagle One car care products for
automotive cleaning and maintenance and operates
Valvoline Instant Oil Change, the second largest quick-lube
chain in the US.
United Motors Lanka PLC | Annual Report 2013/14 53
Sustainability review contd.
Sojitz Corporation, Japan
Our trading partner in the supply of Mitsubishi &
Mitsubishi FUSO vehicles is a part of the Sojitz Group
that produces new sources of wealth by connecting the
world’s economies, cultures and people in a spirit of
integrity. Sojitz has several divisions, namely, “Machinery
& Aerospace”, “Energy & Mineral Resources”, “Chemicals
& Plastics”, “Real Estate Development & Forest Products”,
“Consumer Lifestyle Business”, “IT Business”, etc. It has
409 subsidiaries and 216 affiliates all over the world.
TVS Motor Company Ltd., India (TVS)
TV Sunderam Iyengar & Sons Limited, one of the largest
conglomerates in India with a history of nearly 100 years
in the automobile trade, is the major share holder in TVS
Motor Company Ltd. The Company is the third largest twowheeler manufacturer in India and ranks amongst the top
ten globally. It is the only automotive manufacturer to have
been honoured with the world’s most prestigious Demming
Prize for Total Quality Management. TVS currently
manufactures a wide range of two-wheelers from mopeds
to racing inspired motorcycles, the popular models being
the TVS Flame, TVS Apache, TVS Scooty, TVS Metro and
TVS Streak. It also introduced TVS King a three wheeler to
its Indian, Sri Lankan and other regional markets recently.
Perodua Sales Sdn Bhd, Malaysia
This Company is a wholly owned subsidiary of
Perusahaan Otomobil Kedua Sdn Bhd (PERODUA) which
was established in 1993. The Company’s operations
commenced in early 1994 and the first vehicle, the ever so
popular, Perodua Kancil was introduced to the Malaysian
market in August 1994. To date, a range of vehicles such
as the Perodua Rusa, Kembara, Kenari, Kelisa, Myvi, Viva
and Nautica have rolled out of the Perodua plant. The plant
currently has a production capacity of 250,000 units per
annum and has over 10,000 employees.
Yokohama Rubber Company Limited, Japan (Yokohama)
Yokohama, manufacturers of the world renowned
Yokohama tyres was established in 1917. Yokohama
has acquired the ISO 9001 accreditation for its quality
assurance system as well as the ISO 14001 accreditation
for its environment management systems. Yokohama
tyres are proven to meet very high quality standards
and therefore has been selected by almost all vehicle
manufacturers in Japan as an original tyre for brand new
vehicles.
54 United Motors Lanka PLC | Annual Report 2013/14
Jiangxi Jiangling Motors Import and
Export Co. Ltd., China
The JMC single cab is manufactured by Jiangling ISUZU
Motors Co. Ltd. and marketed by Jiangling Motors Co. Ltd.,
ranked 25th amongst the top 500 industrial companies
in China. Jiangling Motors Co. Ltd., is a Public Limited
Liability Company, having Jiangling Holding Group and
Ford Motor Company of USA as its major shareholders.
Jiangling ISUZU Motors Co. Ltd., which is a subsidiary of
Jiangling Motors Co. Ltd., and the manufacturer of quality
JMC vehicles, is a joint venture between Jiangling Motors
Co. Ltd. And ISUZU Motors Ltd., of Japan, catering to the
top end of the commercial vehicle segment in the massive
Chinese market. The strongest product line of JMC is its
light truck range.
Zotye Automobile Co. Ltd., China
The Nomad compact SUV is a product of Zotye Automobile
Co. Ltd., of Yongkang Industrial City, south of Shanghai.
Zotye Automobile Co. Ltd., is a Public Limited Liability
Company, listed on the Hongkong Stock Exchange and
is the 5th largest manufacturer of SUVs in China. Zotye
Automobile has now successfully developed the all new 4x4
auto transmission model of the NOMAD.
JK Tyre and Industries Ltd., India
JK tyre is manufactured by JK Tyre and Industries Ltd of
India. JK has been one of the largest four wheeler tyre and
truck and bus tyre producers in India. JK tyre is also a
strong player in the “Off the Road” tyre segment and has
presence across India in almost all applications. JK tyres
are currently used by automobile giants in India such as
TATA, Mahindra, Maruti and Ashok Leyland as the original
fitting. JK offers a wide range of tyres for a large area
of operations. Its superior performing products are well
accepted and have resulted and proved its performance
in a continuously growing consumer base throughout the
world. Currently the company has nine plants – six in India
and three in Mexico. The company exports its tyres to over
80 countries across 6 continents and enjoys premium
brand status in various developed markets, including South
America, USA and Africa etc. The combined capacity of JK
Tyre and JK Tornel stands at 20 million tyres per annum.
United Motors Lanka PLC | Annual Report 2013/14 55
Sustainability review contd.
Bharat Petroleum Corporation Ltd., India
Bharat Petroleum Corporation Ltd., (BPCL), is a Fortune 500
company and is amongst the largest petroleum companies
in India and can boast of success in the petroleum industry
in activities including lubricants and is also in the LPG
business. BPCL is a household name in India, known not
only for their performance in business but also because
of what they have given back to society under their social
responsibility programmes. Even though it is a state owned
Company, BPCL has been growing at a phenomenal rate.
Their aggressive approach has now taken them overseas to
the Middle East, Africa & other parts of South East Asia,
making them a fast growing international brand.
Chongqing Yuan Group Imp. & Exp. Co. Ltd.
Chongqing Yuan group is a subsidiary of the renowned
Dongfeng group of China. The Dongfeng group is the 2nd
largest vehicle manufacturer in China and is considered
to be one of the first companies in China to commence
mass scale vehicle production way back in 1930. Today
the Dongfeng group has strategic ventures with world
renowned automobile manufacturers such as KIA of Korea,
Honda, Nissan of Japan and Peugeot of France.
Today DFSK is one of China’s most sought after mini trucks.
TVS Tyres
Incorporated in 1982 TVS Sri Chakra Limited is a part of
the TVS Group with a turnover of USD. 8 billion. TVS Sri
Chakra manufactures 19 million two wheeler tyres and
0.5 million off highway tyres a year. TVS is the largest
supplier to all the leading two wheeler manufacturers in
India including TVS, Honda, and Hero. TVS exports a full
range of tyres to more than 70 countries around the world.
Turnover in 2012 /13 - USD 315 million.
SAIC Motor - China
The history of MG dates back to 1924 when William Morris
and Cecil Kimber’s joint efforts became a reality with the
birth of the first MG sports car in Britain. Today the brand
which continues with its rich heritage of 90 years is backed
by SAIC Motors, which is listed as the largest automobile
company in the Chinese stock market. SAIC Motors
remains number one for the last 8 years consecutively.
SAIC Motors is also ranked 103rd among the Fortune
500 for the ninth time. SAIC Motor manufactures and
sells passenger cars and commercial vehicles. Among its
group companies, SAIC Motor Passenger Vehicle Company,
Shanghai Volkswagen, Shanghai General Motors, SAIC-GMWuling are the passenger car producers while SAIC Motor
Commercial Vehicle Company, Nanjing Auto Corporation,
Sunwin and SAIC-IVECO Hongyan Commercial Vehicle
Company manufactures vans, buses and trucks.
56 United Motors Lanka PLC | Annual Report 2013/14
THE EDUCATIONAL SUPPORT THEME WAS EXTENDED BEYOND COLOMBO DURING THE CURRENT
YEAR, WITH THE CSR TEAM JOINING HANDS WITH THE KANDY, ANURADHAPURA AND BADULLA
BRANCHES TO DISTRIBUTE SCHOOL BOOKS AND STATIONERY
Our community engagements
As a policy we have attempted to
build strong community relationships
based on goodwill. This has been
facilitated through community support
programmes that allow the Company
to engage with different communities.
During the current year, we continued
to focus on the areas of education
and health, as the main thrust of our
community support programmes.
Education support
We believe education opens up
opportunities for under privileged
children to climb out of poverty and
deter them from anti-social activities.
We also believe that supporting
education of such children encourages
them to stay in school and complete
their education, instead of dropping
out from school. Therefore, we have
continually supported children’s
education over the years, and we
have targeted children in undeserved
communities within the locality of our
branches.
Over the past 7 years, United Motors
has been supporting Wijeyaba
Vidyalaya of Grandpass, which
caters to children from undeserved
communities within the locality of
UML’s main workshop. The school is
also undeserved and requires support
to provide a better quality education
for its students. Therefore, as part
of a voluntary support system, UML
introduced a scholarship scheme
for students based on set criteria.
In 2013, 23 students were granted
scholarships that will support their
education for another year, ensuring
lower dropout rates and encouraging
other students to also make a greater
effort to perform better in class. The
Distribution of school books
UML workshop staff and the CSR
team also went from house to house
in the Orugodawatte, neighbourhood
and presented 125 children from the
lowest income families, with school
books and stationary. In addition
to directly supporting the students
of the school, UML also helped to
improve the educational environment
by renovating the ground floor of
the school building. This two storied
building of the school was in an
unusable condition and on inspecting
the building, the UML CSR team
decided to renovate the ground floor
of the building. The improved ground
floor will be used to conduct music
classes and to set up a science
lab, which will enhance educational
opportunities for students.
The educational support theme
was extended beyond Colombo
during the current year, with the
CSR team joining hands with the
Kandy, Anuradhapura and Badulla
branches to distribute school books
and stationary to 259 less privileged
children. The Grama Sevaka assisted
the Company in identifying the
most deserving families from low
income communities ensuring that
the educational support made the
highest possible impact. This way,
the Company was able to reach out
to 94 children in Kandy, 114 children
in Anuradhapura and 51children in
Badulla. We believe our support and
interest in their future will encourage
these children to remain in school and
continue their studies that will open
up opportunities for their future.
Scholarships for children of war
heroes
We continued to support the country’s
war heroes by assisting with the
education of their children. This year,
UML provided 100 scholarships for
the children of fallen and disabled war
heroes of the Sri Lanka Army Special
Forces regiment.
United Motors Lanka PLC | Annual Report 2013/14 57
Sustainability review contd.
We’re unveiling a series of environment friendly
vehicles to the local market, as part of our
commitment towards a greener environment
Opening of the renovated school
building at Wijeyaba Vidyalaya,
Colombo 14.
During the current year, the Sri Lanka
Army Special Forces Regiment, which
is the elite force of the Sri Lanka
Army, made a request to support their
efforts in financially assisting children
of fallen and disabled war heroes.
Therefore, on the recommendation of
the Commandant of the Regimental
Centre of Special Forces, the Company
distributed 100 scholarships for
children of war heroes from the
Special Forces.
Healthcare facilities
As health is a primary factor of social
well-being and quality of life, UML has
traditionally supported initiatives that
improve available health facilities and
also access to health services for the
under privileged. During the current
year, the CSR team, together with
the Matara branch, conducted an eye
camp in collaboration with Vision Care
to enhance access to eye care. The eye
camp attracted about 200 people who
were tested by Vision Care, and 150
spectacles were distributed among
residents of Matara.
Our commitment to the
environment
Being a leading transport solutions
provider means that our carbon
footprint is of concern and we’re
unveiling a series of environment
friendly vehicles to the local market,
as part of our commitment towards a
greener environment. Over the years
we have invested in environmentally
friendly processes to minimise
environmental impacts through our
operations. From the previous financial
year, we extended this concept
of environmental responsibility
towards our product line. This
sustainability focus is supported by
the strong environmental and social
commitments of the Mitsubishi Motor
Corporation. In February 2013, we
introduced the Mitsubishi Mirage, as
part of our commitment towards a
greener environment. The Mirage is
recognised internationally for its low
fuel consumption and low carbon
emissions. Therefore, Sri Lankan
consumers have a dual benefit of a
lower cost vehicle that is also kinder
to the environment.
During the current financial year, we
expanded our eco-friendly vehicle
portfolio to include the Attrage.
This Sedan from Mitsubishi has an
environmentally friendly design,
coupled with lower fuel consumption.
During the new financial year, we
will introduce a new hybrid vehicle
that will enhance this line up of
environmentally friendly vehicle
choices. Going even further, we plan
to back up our range of eco-friendly
vehicles with a line of environmentally
friendly lubricants. This will ensure
further value additions to our
environmental commitment.
In addition to our product line, we
have been aligning our internal
operations to be more environmentally
responsible. We have introduced
different methods within the company
to reduce waste of resources and
protect our environment. For instance,
we have reduced wastage of paper
by reusing paper and we have a
58 United Motors Lanka PLC | Annual Report 2013/14
system in place to collect and recycle
cardboard packing materials from
imported spare parts. All eight of
our workshops are equipped with
water treatment plants in compliance
with Central Environmental Authority
standards, ensuring no harmful
effects to the eco system. Through
agreements with specialised service
providers we ensure that burned oil
from vehicles and used oil filters are
disposed safely.
Government and regulators
We are committed to comply with all
statutory and regulatory requirements
and payments are done on a timely
basis.
As a large tax payer we have paid Rs
5,229 million in compliance with tax
regulations and contributed to the
government development initiatives by
way of taxes.
Lenders
We consider banks and financial
institutions partners of our business.
We keep them updated about the
financial performance and future
forecast of the Company. We obtain
financial solutions from the lenders
depending on specific requirements.
Lenders help us by structuring best
solutions, based on the requirement.
We ensure that all terms and
conditions of lending facilities are met
by the Company.
Stewardship
Group structure
Board of Directors
Senior Management Team of UML
Subsidiaries’ CEOs
Senior Management of Subsidiaries &
Jointly Controlled Entities
Corporate governance
Nomination committee report
Remuneration committee ceport
Audit committee report
Enterprise risk management
Annual report of the board of directors
60
62
66
69
70
71
89
90
91
93
97
United Motors Lanka PLC | Annual Report 2013/14 59
Group structure
Name of Company
United Motors Lanka PLC
Incorporated on
09 May 1989
Reg. No
Chairman
PQ 74
Sunil G. Wijesinha
Subsidiaries
Unimo Enterprises Ltd.
100%
17 March 1994
PB 218
Sunil G. Wijesinha
Orient Motor Company Ltd.
100%
27 March 1992
PB 117
Sunil G. Wijesinha
UML Property Developments Ltd.
100%
08 October 1993
PB 253
Sunil G. Wijesinha
UML Agencies & Distributors (Pvt) Ltd.
100%
12 November 2001
PV 1514
Sunil G. Wijesinha
21 November 1995
PV 9382
V. Srinivasan
TVS Auto Parts (Pvt) Ltd.
65%
Effective 32.5%
03 June 2003
PV 6030
R. Dinesh
TVS Automotives (Pvt) Ltd.
100%
Effective 50%
27 March 2008
PV 63607
Sunil G. Wijesinha
TVS Lanka (Pvt) Ltd.
50%
Subsidiaries
Jointly Controlled Entities
(Parent Company)
60 United Motors Lanka PLC | Annual Report 2013/14
Directors
C. Yatawara
(Chief Executive Officer/Executive Director)
A.W.Atukorala
A.C.M.Lafir
(Executive Director - Finance)
R.H.Yaseen
(Executive Director-After Sales Services)
Mrs. A.H. Fernando
M. Sawada
M. Gunathilake
(Chief Executive Officer/Executive Director)
C. Yatawara
R. H. Yaseen
Secretaries
Mrs. R.M. Hisham
Auditors
KPMG
Activities
Import & distribution of brand new
Mitsubishi, FUSO vehicles, genuine
Mitsubishi spare parts and provision
of workshop facilities for repairs and
lubrication services of vehicles.
Distribution of Valvoline Lubricants & Eagle
One Car Care products.
Mrs. R. M. Hisham
KPMG
Import and distribution of Perodua Cars,
Morris Garages (MG) Cars, Zotye Nomad SUVs,
JMC Cabs, Yokohama tyres and assembly of
Zotye Extreme SUVs
C. Yatawara
Mrs. R. M. Hisham
KPMG
Import and distribution of DFSK Trucks
Hiring of motor vehicles
C. Yatawara
Mrs. R. M. Hisham
KPMG
Construction of warehouse complex for hiring
purpose. Development of company owned
properties
C. Yatawara
Mrs. R. M. Hisham
KPMG
No commercial operations during the year
R.Dinesh
R.Haresh
C.Yatawara
Sunil G. Wijesinha
K.N. Radhakrishnan
R & R Secretarial
Services (Pvt) Ltd.
KPMG
Import & distribution of TVS motor cycles,
three wheelers and spare parts and operation
of workshops
A.D.Motha
C.Yatawara
M.A.Perumal
R.Subramanian
Sunil G. Wijesinha
R & R Secretarial
Services (Pvt) Ltd.
R.Dinesh
N.Krishnamoorthy
C.Yatawara
R & R Secretarial
Services (Pvt) Ltd.
KPMG
KPMG
Import & distribution of motor vehicle spare
parts
Import and distribution of BPCL-MAK
lubricants, JK and TVS tyres
RESIGNATION / RETIREMENTS AND APPOINTMENTS OF DIRECTORS DURING THE YEAR
M. Gunathilake was appointed to Unimo Enterprises w.e.f. 05 June 2013
R.M.S. Fernando resigned from UML Group w.e.f. 10 June 2013
T.M.R.B. Tennekoon and S. Nagendra, Directors of UML did not seek re-appointment at
the AGM held on 05 July 2013
Sunil G. Wijesinha was appointed to UML Group w.e.f. 05 July 2013
Mrs. A.H. Fernando was appointed as a Director of UML w.e.f. 05 July 2013
K.N. Radhakrishnan was appointed to TVS Lanka (Pvt) Ltd.,w.e.f. 01 September 2013
M. Yokoi, Director of UML resigned w.e.f. 29 October 2013
M. Sawada, Director of UML was appointed w.e.f. 29 October 2013
United Motors Lanka PLC | Annual Report 2013/14 61
Board of Directors
62 United Motors Lanka PLC | Annual Report 2013/14
Left to right
Mr. Eardley Perera Non Executive Director - Appointed on 27 May 2014
Mrs. A. H. Fernando Non Executive Director
Mr. A. W. Atukorala Non Executive Director
Mr. Sunil G. Wijesinha Chairman
Mr. A. C. M. Lafir Executive Director - Finance
Mr. C. Yatawara Chief Executive Officer/Executive Director
Mr. R. H. Yaseen Executive Director - After Sales Services
Mrs. R. M. Hisham Company Secretary
Mr. M. Sawada Non Executive Director (not pictured)
United Motors Lanka PLC | Annual Report 2013/14 63
Board of Directors
Mr. Sunil G. Wijesinha
Mr. A.W. Atukorala
Mr. A.C.M. Lafir
MBA (SriJ), CEng (UK), FCMA (UK), CGMA (UK)
B.Sc (Leeds) UK, MTT (North Carolina) USA, MBA
FCMA, ACA, MBA (Sri J)
Chairman - Non Executive Director
(Independent)
Non Executive Director
(Independent)
Executive Director – Finance
Mr. Wijesinha is the Chairman of
NDB Bank PLC, Watawala Plantations
PLC, Employers’ Federation of
Ceylon, Unimo Enterprises Limited,
Orient Motor Company Limited, UML
Property Developments Limited, UML
Agencies and Distributors (Private)
Limited, TVS Automotives (Pvt)
Ltd, Deputy Chairman of Siyapatha
Finance Ltd and President of National
Chamber of Commerce of Sri Lanka.
Mr. Atukorala serves as an
Independent Non-Executive Director of
Orient Finance PLC, UB Finance Ltd.,
Pragnya Tech Parks Lanka (Pvt.) Ltd,
Arni Holdings and Investments (Pvt.)
Ltd. and Unawatuna Boutique Resort
(Pvt) Ltd.
Mr. Lafir is a Fellow of the Chartered
Institute of Management Accountants
(CIMA)-UK and an Associate Member
of the Institute of Chartered
Accountants of Sri Lanka (ICASL)
Mr. Wijesinha is also a Director of
BizEx Consulting (Pvt) Ltd, TVS Lanka
(Pvt) Ltd and TVS Auto Parts (Pvt) Ltd.
Mr. Wijesinha was the former
Chairman and MD of Dankotuwa
Porcelain PLC, Chairman of Merchant
Credit Ltd, Chairman of Employees’
Trust Fund Board, Deputy Chairman
of Sampath Bank PLC, President of
Japan Sri Lanka Technical and Cultural
Association and Managing Director of
Merchant Bank of Sri Lanka PLC.
Mr. C. Yatawara
B.A. Econ., Lewis & Clark College, Oregon, (USA)
Chief Executive Officer/Executive
Director
Mr. Yatawara is a Director of Unimo
Enterprises Ltd., Orient Motor
Company Ltd., UML Property
Developments Ltd., UML Agencies &
Distributors (Pvt) Ltd, TVS Lanka (Pvt)
Ltd., TVS Auto Parts (Pvt) Ltd. and
TVS Automotives (Pvt) Ltd.
Mr. Atukorala was a former Deputy
General Manager, ANZ Grindlays
Bank, Sri Lanka; Country Manager Sri
Lanka, Mashreq Bank PSC, advisor to
the Ministry of Policy Development
& Implementation. He was also a
Director of Union Bank PLC for a
period of nine years and retired in
2012.
Mr. Atukorala had also served as a
Member of the Technology Initiative
for the Private Sector - an USAID
sponsored project with the Ministry
of Industrial Development. He was
also a Working Committee Member
- Commercial Banking Sector Presidential Commission on Finance
and Banking, Committee Member
- Banker’s Club of Sri Lanka and a
Former Director - Sri Lanka Banks
Association (Guarantee) Ltd, and
CRIB - Credit Information Bureau of
Sri Lanka.
64 United Motors Lanka PLC | Annual Report 2013/14
He also holds a Masters Degree in
Business Administration from the Post
Graduate Institute of Management of
the University of Sri Jayawardenapura
and has over 25 years of senior
management experience in diverse
business activities.
Mr. Lafir is a Director of Skills
International (Pvt) Ltd.
Mr. R.H. Yaseen
Executive Director – (After Sales
Services)
Mr. Yaseen is a Director of Unimo
Enterprises Limited. He was a former
Director of Readywear Industries
Limited.
Mrs. A. H. Fernando
Mr. Eardley Perera
ACA,ACAM
Chartered Marketer
Non Executive Director (NonIndependent)
Non Executive Director
(Independent)
Mrs. Fernando, an Associate member
of Institute of Chartered Accountants
of Sri Lanka and Institute of
Certified Management Accountants
of Sri Lanka has over 19 years
experience in the field of auditing,
management consultancy, finance and
administration.
Eardley Perera is a Chartered
Marketer and Graduate of the
Chartered Institute of Marketing, UK
with a membership spanning over
forty years. He has had extensive
management training in Sweden,
Netherlands, the UK, India, South
Korea, the Philippines and Singapore.
Mrs. Fernando is an Executive Director
of Readywear Industries Ltd. She also
serves in the boards of R I L Property
(Pvt) Ltd, Videowall (Pvt) Ltd and
R I L Trust, which promotes computer
literacy among under privileged
schools around the country.
His management experience, spanning
over four decades, include the Sales
and Marketing, Commercial and
General Management functions.
He now serves as a Non-Executive
Director of several Public and Private
Companies.
Mr. M. Sawada
Non Executive Director
(Independent)
He is actively engaged in management
consultancy and extensive teaching
experience as a lecturer on the
CIM (UK) Postgraduate Course
in Marketing and on the MBA
programme of the Postgraduate
Institute of Management (PIM) of the
University of Sri Jayewardanepura,
where he now serves as a member of
the Board of Study.
General Manager – Asia & ASEAN
A Department, Mitsubishi Motors
Corporation, Japan
Mrs. R.M. Hisham
ACIS (UK), MBA (Sri J)
Company Secretary
United Motors Lanka PLC | Annual Report 2013/14 65
Senior Management Team of UML
We have the right people with the right skills, an
unparalleled portfolio, proven strategies and a culture
committed to being the automotive company most admired
for its people, partnerships and performance.
66 United Motors Lanka PLC | Annual Report 2013/14
Seated from Left
Mr. R. Siriwardene
General Manager
(HR & Administration)
Mr. T. Jayasekara
General Manager
(Finance & Planning)
Mr. G. Pilapitiya
General Manager
(New Vehicle Sales)
Mr. P. Ellepola
General Manager
(Lubricants & Car Care )
Mr. B. Singhage
General Manager
(Technical, Parts & Accessories)
United Motors Lanka PLC | Annual Report 2013/14 67
Senior Management Team of UML
Standing from Left
Mr. Sudhakaran
Assistant General Manager
(Technical)
Mr. W. P. S . Kumara
Assistant General Manager
(Technical)
Mr. A. S. J. Cooray
Assistant General Manager
(Truck & Bus)
Mr. B. De Fonseka
Assistant General Manager
(Technical)
Mr. T. Gunathilaka
Assistant General Manager
(Branch Operation)
Mrs. S. Fernando
Assistant General Manager
(Internal Audit & Monitoring)
Mr. S. Withana
Assistant General Manager
(Information Technology)
Mr. M. Dissanayake
Assistant General Manager
(New Vehicle Sales)
Mrs. R. M. Hisham
Assistant General Manager
(Human Resources)
Mr. T. Madugala
Assistant General Manager
(Public Sector Sales)
Mr. K. Gunatilleka
Assistant General Manager
(New Vehicle Sales)
Mr. S. de Silva
Assistant General Manager
(Marketing)
Mr. T. Hopwood
Assistant General Manager
(Projects)
Mr. T. Peiris
Assistant General Manager
(Technical)
Mr. H. D. Rajapakse
Assistant General Manager
(Sales Support Services)
68 United Motors Lanka PLC | Annual Report 2013/14
Subsidiaries’ CEOs
Unimo Enterprises Ltd.
Mr. M. Gunatilleke
Chief Executive Officer/ Executive
Director.
TVS Lanka (Pvt) Ltd.
Mr. S. Agalawatte
Chief Executive Officer
United Motors Lanka PLC | Annual Report 2013/14 69
Senior Management of Subsidiaries &
Jointly Controlled Entities
1
2
3
4
5
6
7
8
9
10
11
Unimo Enterprises Limited
TVS Lanka (Pvt) Ltd
TVS Automotives (Pvt) Ltd
1. Mr. L. Wijeratne
Assistant General Manager - Perodua
6. Mr. S. Bandarawatta
Assistant General Manager- Finance &
Head of Three Wheeler Business
10. Mr. R. Serasinghe
Head of Business unit - Tyre
2. Mr. C. Nanayakkara
Assistant General Manager - Logistic
Operations
3. Mr. U. Fernando
Assistant General Manager (Operations)
4. Mr. R. Opatha
Assistant General Manager - Chinese
Vehicles
7. Mr. G. Anthony
Head of Sales - Two Wheeler Business
8. Mr. S. D. R. L. Wickumsiri
Assistant General Manager - Service &
Operations
9. Mr. M. L. K. Gunawardena
Senior Manager - Human Resources &
Administration
Orient Motor Company Limited
5. Mr. B .V .Pathirana
Deputy General Manager (Operations)
70 United Motors Lanka PLC | Annual Report 2013/14
11. Mr. P. de Silva
Head of Business unit - Lubricant
Corporate governance
“A ROBUST CORPORATE GOVERNANCE FRAMEWORK IS CRITICAL FOR CREATING AND
DELIVERING SUSTAINABLE STAKEHOLDER VALUE AND TO MAINTAIN INVESTOR TRUST
AND INTEGRITY”
The Board is responsible to
stakeholders for creating and
delivering sustainable stakeholder
value and to fulfil this a robust
Corporate Governance Framework is
critical in maintaining investor trust
and business integrity.
This report explains UMLPLC’s
governance policies and practices
and sets out the framework in which
the Board manages the Company in
ensuring a sustainable business.
Corporate governance framework
The Corporate Governance framework
entails three key components as
summarised below;
Internal governance structure
Assurance
Regulatory framework
Internal governance structure
The internal governance structure is
the components that are embedded
within the Company in order to
execute governance related initiatives,
systems and processes.
Board of Directors and senior
management committees
The Board of Directors (the Board)
is the apex body responsible and
accountable for the stewardship
function of the Company. The
Directors are collectively responsible
for upholding and ensuring the highest
standards of corporate governance
and inculcating ethics and integrity
across the Company. The Board has
delegated some of its functions to
board committees, while retaining
final decision rights pertaining to
matters under the purview of these
committees. Accordingly, certain
functions of the Board are delegated
through the board committees,
enabling the committee members
to focus on their delegated areas of
responsibility and impart knowledge
and experience in areas where they
have greater expertise.
The Company has three Board subcommittees.
Audit Committee
Remuneration Committee
Nomination Committee
Executive authority is delegated
through a committee structure
ensuring that Chief Executive Officer/
Executive Director, Executive DirectorFinance, Executive Director – After
Sales and other divisional heads are
accountable for the total company,
division respectively. Clear definitions
of authority limits, responsibilities and
accountabilities are set and agreed
upon in advance to achieve greater
operating efficiency and to expedite
the decision making.
The Senior Management Committee
under the leadership and direction of
the Chief Executive Officer/Executive
Director, implements the policies and
strategies determined by the Board
and manages through delegation and
empowerment business affairs of the
Company.
The role of the Board
The Board has provided strategic
direction to the development of
short, medium and long term
strategies which are aimed at long
term sustainability of the Company.
The business strategies are reviewed
by the Board with an update at
a subsequent Board meeting on
execution of the agreed strategy by
the management. The Board has
put in place a senior management
committee led by the Chief Executive
Officer/Executive Director with the
required skills, experience and the
knowledge necessary to implement
the business strategies of the
Company.
The Board recognises its responsibility
for the Company’s system of internal
controls and for reviewing its
effectiveness on a continuous basis.
These systems manage the risk of the
Company’s business and ensure that
the financial information on which
decisions are made and published
is reliable and also ensures that
Company’s assets are safeguarded.
The Board ensures that procedures
and processes are in place to ensure
that the Company complied with
applicable laws and regulations. The
Board approved the Code of Conduct
and Ethics developed by the Company
for adoption.
The Board evaluates and approves
all new business and investment
proposals and the restructuring
plans for existing businesses. The
Board also reviews budgets and
monitor performance of the individual
business units on a monthly basis or
when required.
Board balance and independence
Our Board consists of a Chairman,
Chief Executive Officer/Executive
Director and five other Directors.
Out of seven directors four are NonExecutive Directors as at 31 March
2014.
United Motors Lanka PLC | Annual Report 2013/14 71
Corporate governance contd.
Resignations and new appointments
to the Board during the year are given
below;
Resignations
Mr. R. M. S. Fernando
- w.e.f. 10 June 2013
Mr. M. Yoki
- w.e.f. 29 October 2013
Mr. T. M. R. B. Tennakoon
- did not seek reappointment at the AGM
held on 5 July 2013
Mr. S Nagendra
- did not seek reappointment at the
AGM held on 5 July 2013
New appointments
Mr. Sunil G Wijesinha
- w.e.f. 5 July 2013
Mrs. A. H. Fernando
- w.e.f. 5 July 2013
Mr. M. Sawada
- w.e.f. 29 October 2013
Balance of Executive and NonExecutive Directors
Four out of the seven Board members
are Non-Executive Directors of which
three Directors are independent.
43%
57%
Executive
Non-Executive
Non-Executive Directors bring a wide
range of skills and versatile experience
including independent judgement on
issues related to strategies, financial
and operational performance, key
appointments and standards of
business conduct, ethics and all
matters pertaining to the Board. They
also provide constructive feedback on
strategies, scrutinise and challenge
performance across the business
sectors, assess the risk profile,
integrity of financial information,
controls and determine the Company’s
policy for executive remuneration.
Non- Executive Directors submits
a signed declaration of his/her
independence against specific criteria
on a yearly basis.
Role of Chairman and Chief Executive
Officer/Executive Director
There is a clear distinction between
the functions and responsibilities of
the Chairman and the Chief Executive
Officer/Executive Director.
The Chairman’s main responsibility is
to lead, direct and manage the Board
to ensure that it operates efficiently
and fully discharges its legal and
regulatory responsibilities. The role of
the Chief Executive Officer/Executive
Director is to manage the day to day
operations of the business and lead
the senior management committee
in making and executing operational
decisions.
Board effectiveness
Board meetings
The Company’s performance and
the business strategies are reviewed
and monitored at the monthly
board meetings. Further, the parent
company Board reviews the financial
performance and business strategies
of all the subsidiaries and the jointly
controlled entities at monthly board
meetings and after the end of each
quarter heads of those companies
make presentations to the Board on
company performance and strategies
against the annual plan. A formal
agenda is prepared for all board
72 United Motors Lanka PLC | Annual Report 2013/14
meetings by the Company Secretary in
consultation with the Chief Executive
Officer/ Executive Director and the
Chairman. During the year under
review, 17 Board meetings were held
and the attendance of directors at
each meeting is disclosed in the table
given in this report on page 88.
Performance evaluation and
remuneration of directors
There is a formal process for appraisal
of board performance. The appraisals
are carried out at the end of the year
through a structured questionnaire
in four separate parts addressing the
following:
Overall collective performance
of the Board
Evaluation of the performance
of the Chairman
Self-evaluation by each Director
Evaluation of Non-Executive
Directors
The Remuneration Committee consults
the Chief Executive Officer/ Executive
Director on the remuneration
proposals including revision of salary
packages of Executive Directors and
the senior management.
Directors’ fees are paid to NonExecutive Directors are based on the
time commitment and responsibilities
of their role in board meetings and
subcommittee meetings.
Appointments of directors
Nomination Committee recommends
to the Board any new appointments.
There were three appointments to
the Board during the year. Upon the
appointment of a new director to
the Board, the Company informs the
Colombo Stock Exchange with a brief
resume of the director, containing
the nature of his/her expertise in
relevant functional areas, other
directorships held and the nature of
the appointment.
Governance systems and procedures promote
good governance within the wider context of
achieving sustainable growth which is beyond
mere conformance with the regulations.
Re-election of directors
The Company’s Articles of Association
states that all Non- Executive Directors
who are appointed by the Board
shall be subject to re- election by the
shareholders at the first opportunity
after their appointment. The Section
82 of the Company’s Articles of
Association further states that at
every AGM one third of the NonExecutive Directors excluding the
Chairman (out of the directors who
have been longest in office since the
last election or appointment) shall
retire from office each year. However,
keeping in line with the Code of Best
Practice on Corporate Governance, the
Chairman of the Company who is a
Non -Executive Director also seek reelection on rotation. Accordingly, the
directors who shall seek re- election at
this year’s AGM have been indicated in
the notice of the meeting on
page 169.
and ensures the reliability of the
information provided to stakeholders
and assesses the effectiveness of
the internal control systems and
procedures to provide reasonable
assurance that all transactions
are accurately and completely
recorded in the books of accounts.
Appropriateness of the accounting
policies and estimates used in
preparation of financial statements
are also assessed by the Audit
Committee.
Independent advice
A procedure has been put in place
for directors to seek independent
professional advice, in furtherance of
their duties at the Company’s expense.
This will be coordinated through the
Board Secretary, Chief Executive
Officer/Executive Director as and when
it is required.
Internal controls
The Audit Committee assists the
Board in the implementation of the
Board’s policies and procedures
on risks and controls by identifying
and assessing the risks faced
by the Company and designing,
implementing and monitoring of
suitable internal controls to mitigate
and control these risks .The Board
is of the view that the system of
internal controls in place is sound
and adequate to provide a reasonable
assurance regarding the reliability
of financial reporting and that the
preparation of financial statements
for external purposes is in accordance
with relevant accounting principles
and regulatory requirements.
Governance systems and procedures
Governance systems and procedures
promote good governance within the
wider context of achieving sustainable
growth which is beyond mere
conformance with the regulations.
Governance systems and procedures
of the Company are given below;
Financial reporting
The Audit Committee oversees the
Company’s financial reporting process
A balanced and understandable
assessment of the company’s financial
position, performance and prospects
is presented by the company in
the annual report. Various reports
including the Chairman’s review, CEO’s
review and management discussion
and analysis are used in addition
to annual financial statements and
interim accounts for this purpose.
over financial reporting and such
reports are reviewed by the Audit
Committee.
Fraud risk assessment
The susceptibility of business
processes to misappropriation
and fraud is reviewed as part of
the internal audit programme. The
external auditors also perform
an evaluation of the company’s
processes to assess the possibility
of manipulation, falsification and
alteration of accounting records. The
company adopts a zero tolerance
policy in cases of fraud and
misappropriations.
Risk management
The company has implemented a risk
management process to identify risks
which may impede the achievement
of business objectives and develop
appropriate mitigation strategies.
Heads of divisions identify the key
strategic /operational risks which
affect their functions and list out
mitigating action plans. The risk map
summarised at entity level is reviewed
by the senior management and Audit
Committee. A detailed report on risk
management initiatives is provided
in the enterprise risk management
section of this report on pages
93 to 96.
Code of conduct
Code of conduct gives guidelines to
company directors, general managers,
managers, executives and employees
in applying legal and ethical practices
to their everyday work. The Code
describes standards of integrity and
also some of the specific principles
and areas of laws as follows;
The internal audit division carries
out regular review on internal control
systems including internal controls
United Motors Lanka PLC | Annual Report 2013/14 73
Corporate governance contd.
Conflicts of interest and outside
activities
Privacy / confidentiality
Gifts and entertainment
Personal investments
Know your customers / anti
money laundering
Accuracy of company records
and reporting
Protecting UML group’s assets
Workplace responsibilities
Raising ethical issues
Special responsibilities of
superiors and managers
Compliance with laws, rules and
regulations
Key irregularities
Disciplinary procedures
The Code specifically addresses the
following;
Share trading policy - Directors
and other specified categories
of employees of UML are
required to refrain from trading
in any shares or other securities
of UML while in possession of
price sensitive information that
is likely to have a material effect
on the price or value of UML
shares that has not been made
public.
Whistle blowing policy - A
process by which any employee,
who suspects wrongdoing at
work, can report his concerns
confidentially directly to the
internal audit division through
an internal whistle blowing
procedure.
Conflict of interest – A
declaration is obtained from
employees annually on conflict
of interest based on specified
criteria.
Confidentiality policy – The
Company policy prohibits
disclosure of material inside
information to anyone other than
persons within the Company
whose positions require them to
know such information.
Engagement with stakeholders
It is of paramount importance
to have a continuous dialogue
between the organisation and its
stakeholders and be responsive to
their expectations / material issues to
ensure sustainability of the operations
in achieving performance objectives.
The Company continuously monitors
the stakeholder expectations against
the delivery and mitigating strategies
are put in place where required.
Engagements with our stakeholders
are detailed in the Sustainability
Report.
Assurance
The “Assurance” element is the
supervisory role of the corporate
governance framework, where a
range of assurance mechanisms
such as monitoring and assessing
effectiveness and corrective actions
being proposed and implemented.
1.
2.
Process control at management
level
Internal assurance by the
internal audit department
Process control at management level
The corporate management reviews
the adequacy, design and operation
of the processes and procedures in
place to ensure that required internal
controls are in place within the
organisation.
Assurance by the internal audit
department
There are clear processes for
monitoring and following up on
corrective actions on control
weaknesses or failures reported.
These audit findings together with the
management comments are reviewed
by the Audit Committee. Details of the
internal audit function are given in the
Audit Committee Report.
Regulatory framework
The Board ensures that the Company
and all of its subsidiaries and jointly
controlled entities comply with the
laws and regulations of the country
through a comprehensive statutory
74 United Motors Lanka PLC | Annual Report 2013/14
compliance checklist signed off by the
relevant management and checked
by the internal audit on a monthly
basis. A summary of the checklist is
presented at monthly board meetings.
The Board of Directors has also taken
all reasonable steps in ensuring that
all financial statements are prepared
in accordance with the Sri Lanka
Accounting Standards (SLFRS/ LKAS)
issued by the Institute of Chartered
Accountants of Sri Lanka and the
requirements of the Colombo Stock
Exchange and other regulatory
authorities. The Board is aware of the
growing importance of the disclosure
of critical accounting policies as part
of good governance.
The Company adhered to the Code
of Best Practice on Corporate
Governance Reporting guidelines
jointly issued by the Institute of
Chartered Accountants of Sri Lanka
and the Securities and Exchange
Commission and also the rules
and regulations stipulated by the
Corporate Governance Listing Rules
published by the Colombo Stock
Exchange (revised in 2013) and also
by the Companies Act No. 07 of 2007.
The compliance with the Code of Best
Practice and listing rules is given
below;
Statement of Compliance
The disclosures below reflect UML’s
level of conformance with the above
Code which comprises of seven
fundamental principles namely:
A.
B.
C.
D.
E.
F.
G.
Directors
Directors’ remuneration
Relationships with shareholders
Accountability and audit
Institutional investors
Other investors
Sustainability reporting
Corporate
Governance
Principles
SEC & CA Sri
Lanka Code
Reference
Compliance
Status
Details of Compliance
A) Directors
A.1. Board
All directors possess the skills, experience and knowledge complemented with a high sense of integrity and
independent judgment. The Board gives leadership in setting the strategic direction and establishing a sound control
framework for the successful functioning of the Group.
Board meetings
A.1.1
Complied
The involvement and commitment of the Directors is evidenced
by the regular board meetings. As a practice company holds
monthly board meetings, at which the Company’s performance
and the business strategies are reviewed and discussed. Further,
the parent company board reviews the financial performance
and the business strategies of all subsidiaries and jointly
controlled entities every month and heads of those companies,
present the quarterly performance and strategies for the next
quarter to the Board.
The Board met 17 times during the year and the attendance at
Board Meetings is set out on page 88.
Board
responsibilities
A.1.2
Complied
Board responsibilities are detailed in page 104.
Compliance with
laws and access
to independent
professional advice
A.1.3
Complied
The Board of Directors ensures that procedures and processes
are in place to ensure that the Company complies with all
applicable laws and regulations. The Company has complied
with all applicable laws and regulations during the year.
The board members seek independent professional advice
from third parties whenever deemed necessary, at Company’s
expense.
Board Secretary
A.1.4
Complied
The Company Secretary provides support to the board ensuring
that Directors receive timely and accurate information required
to fulfil their roles. She attends all meetings and ensures that
minutes are kept for all proceedings at the Board meetings and
provide the Board with support and advice relating to corporate
governance matters, board procedures and applicable laws and
regulations.
Independent
judgment
A.1.5
Complied
Non- Executive Directors are responsible for bringing
independent and objective judgment and scrutinize the
recommendations/proposals made by the Senior Management
Committee led by Chief Executive Officer/ Executive Director
on issues of strategy, performance, resource utilization and
business conduct.
Dedication of
adequate time
and effort by the
Board and Board
Committees
A.1.6
Complied
Board have dedicated adequate time for the fulfilment of their
duties as directors of the Company.
All directors are provided with notice, agenda and board papers
in advance of each meeting. Whenever necessary, matters
are also referred to them by circulars. Additionally, the Board
members have meetings and discussions with management
as and when required. They are also available for consultation
during the meetings.
United Motors Lanka PLC | Annual Report 2013/14 75
Corporate governance contd.
Corporate
Governance
Principles
SEC & CA Sri
Lanka Code
Reference
Compliance
Status
Details of Compliance
A.1.7
Complied
The Board of Directors recognises the need for continuous
training and expansion of knowledge in carrying out their duties
as Directors. The Directors are regularly updated by the Chief
Executive Officer/ Executive Director on relevant information
regarding internal and external environment. Directors also
attend seminars where relevant topics are discussed.
A) Directors Contd.
Training for
Directors
A.2 Chairman and Chief Executive Officer
There should be a clear division of responsibilities between the Chairman and Chief Executive Officer to ensure a
balance of power and authority, in such a way that any individual has no unfettered powers of decisions.
Division of
responsibilities of
Chairman and Chief
Executive Officer/
Executive Director
A.2.1
Complied
The function of the Chairman and the Chief Executive Officer/
Executive Director are clearly segregated. The Chairman
holds office in a non-executive capacity with a clear division
of responsibility at the most senior level of the Company. The
Chairman is responsible for leading and the effective functioning
of the Board.
The Chief Executive Officer/ Executive Director is responsible
for managing the business, monitoring its progress and
implementing the strategies of the Company within the policy
framework formulated by the Board. This ensures balance of
power and authority in strategic and operational decisions.
A.3. Chairman’s role
The Chairman should lead and manage the Board, ensuring that it discharges its legal and regulatory responsibilities
effectively and fully , preserves order and facilitates the effective discharge of the Board function.
Role of the
Chairman
A.3.1
Complied
The role of the Chairman is clearly to run the Board effectively,
maintain right balance within the Board, guide the Chief
Executive Officer/ Executive Director to make sure the Company
is on the right track .The Chairman ensures the optimum
contribution of all the Directors in discussions amongst all
directors where decisions are needed on matters of strategy
and risk etc. Their individual views and concerns are objectively
assessed prior to making key decisions.
Information is presented to the Board via board papers and the
Chairman ensures such information is adequate for decision
making. Also ensures regular meetings are held, the minutes of
which are accurately recorded and where appropriate include
the individual and collective views of the Directors.
A.4. Financial acumen
The Board should ensure the availability within it of those with sufficient financial acumen and knowledge to offer
guidance on matters of finance.
Availability of
sufficient financial
acumen and
knowledge
A.4.
Complied
76 United Motors Lanka PLC | Annual Report 2013/14
All Directors possess financial acumen and knowledge through
experience gained from leading public and private enterprises
coupled with their academic and professional background.
Three senior Chartered/ Management Accountants are in the
Board who possess the necessary knowledge and competence to
guide and advice on matters relating to finance.
Corporate
Governance
Principles
SEC & CA Sri
Lanka Code
Reference
Compliance
Status
Details of Compliance
A.5.Board Balance
There should be balance of Executive and Non-executive Directors so that no individual or small group of individuals
can dominate the Board’s decision-taking.
Presence of NonExecutive Directors
A.5.1
Complied
The Board comprises of seven Directors of whom four including
the Chairman hold office in a Non-Executive capacity. The
requirement of the Code has been complied with throughout the
financial year.
Independent
Director
A.5.2
Complied
Out of four Non- Executive Directors three Directors are
independent.
Criteria to evaluate
independence of
the Non-Executive
Directors
A 5.3
Complied
The Board considers Non-Executive Director’s independence on
an annual basis as per the set criteria.
Signed declaration
of independence by
the Non-Executive
Directors
A.5.4
Complied
All Non-Executive Directors of the Company have made
written submissions as to their independence in line with the
requirements of Schedule J of the Code.
Determination of
independence of
the Directors by the
Board
A.5.5
Complied.
The Board has determined the independence or nonindependence of all Non-Executive Directors based on their
declaration and their information available to the Board.
All Non- Executive Directors except for Mrs. A. H. Fernando are
independent as per the specified criteria.
Alternate Director
A.5.6
Not applicable
No alternate Directors.
Senior Independent
Director
A.5.7
Not applicable
Requirement to appoint Senior Independent Director does not
arise.
Confidential
discussion with the
Senior Independent
Directors
A.5.8
Not applicable
As above.
Meeting of NonExecutive Directors
A.5.9
Complied.
Chairman where necessary holds meetings with Non-Executive
Directors.
Recording of
concerns in Board
minutes
A.5.10
Complied
Company Secretary records all matters discussed and decisions
taken, unresolved matters and details required by the Board for
further clarification and submits the required details for next
board meeting for effective decision making.
A.6.Supply of information
Management should provide time bound information in a form and of quality appropriate to enable the Board to
discharge its duties.
Information to
the Board by the
management
A.6.1
Complied.
The Directors are provided with a comprehensive package of
information for the regular board meetings which is circulated
in advance of scheduled meetings. These include an executive
summary with detailed analysis of financial and non-financial
information.
The Chairman ensures that all Directors are properly briefed on
issues arising at board meetings.
Adequate time for
effective board
meetings
A.6.2
Complied
Board papers are generally sent week before the meeting giving
adequate time for Directors.
United Motors Lanka PLC | Annual Report 2013/14 77
Corporate governance contd.
Corporate
Governance
Principles
SEC & CA Sri
Lanka Code
Reference
Compliance
Status
Details of Compliance
A) Directors Contd.
A.7. Appointments to the Board
A formal and transparent procedure should be followed for the appointment of new Directors to the Board
Nomination
Committee
A.7.1
Complied
Report of Nomination Committee is given on page 89.
The Nomination Committee recommends all new appointments
to the Board , details of the changes in the Board is given on
page 72.
Terms of Reference
for Nomination
Committee
Terms of reference for Nomination Committee is in place.
Duties of
Nomination
Committee
Terms of reference address duties of the Nomination
Committee.
Assessment of
Board composition
by the Nomination
Committee
A.7.2
Complied.
The Nomination Committee carries out continuous review of
the structure, size and composition (including skills, knowledge,
experience) of the Board.
Disclosure of details
of new Directors to
shareholders
A.7.3
Complied
Details of new Directors are disclosed to the shareholders
through an announcement of CSE at the time of their
appointment as well as in the Annual Report.
A.8. Re election
All Directors should submit themselves for re-election at regular intervals and at least once in every three years, and
all Non-Executive Directors should be appointed for a specific term and subject to re-election.
Appointment of
Non-Executive
Directors
A.8.1
Complied
According to the Company’s Articles of Association, at every
AGM, one third of Non-Executive Directors excluding the
Chairman shall retire from office each year. However, keeping in
line with Code of Best Practice of Corporate Governance, the
Chairman also seek re-election on rotation.
Election of the
Directors by the
shareholders
A.8.2
Complied.
As above.
A.9. Appraisal of Board performance
The Board should periodically appraise its own performance against the preset targets in order to ensure that the
Board responsibilities are satisfactorily discharged.
Appraisal of Board
Performance
A.9.1
Complied.
Annual selfevaluation of the
Board and its
Committees
A.9.2
Complied for
the Board
Disclosure of the
method of appraisal
of Board and Board
Sub Committee
performance.
A.9.3
Complied
78 United Motors Lanka PLC | Annual Report 2013/14
There is a formal process for appraisal of Board performance.
The appraisals are carried out at the end of the year through
a structured questionnaire which is in four separate parts
addressing the following;
Overall collective performance of the Board
Evaluation of the performance of the Chairman
Self-evaluation by each Director
Evaluation of Non-Executive Directors
Evaluations of Board Sub Committee have not been carried out.
Corporate
Governance
Principles
SEC & CA Sri
Lanka Code
Reference
Compliance
Status
Details of Compliance
A.10. Disclosure of information in respect of Directors
Details in respect of each Director should be disclosed in the annual report for the benefit of the shareholders.
Details in respect of
Directors
A.10.1
Complied
Brief profiles of the Directors are given in the annual report on
pages 64 and 65.
Directors’ attendance at Board committees is disclosed in the
Annual Report on page 88.
The total number of Board positions (excluding directorship in
UML) held by each director is given on page 88.
A.11.Appraisal of Chief Executive Officer
The Board of Directors should at least annually assess the performance of the Chief Executive Officer.
Targets of Chief
Executive Officer /
Executive Director
A.11.1
Evaluation of the
performance of
the Chief Executive
Officer /Executive
Director
A.11.2
Complied
An annual evaluation of the performance of the Chief Executive
Officer /Executive Director was carried out by Remuneration
Committee. Data presented to the monthly board meetings and
achievement of Company’s annual budget is also considered to
assess the performance of the Chief Executive Officer /Executive
Director.
B) Directors’ remuneration
B.1 Remuneration procedure
Company should establish a formal and transparent procedure for developing policy on executive remuneration and
fixing the remuneration packages of individual Directors. No Directors should be involved in deciding his/her own
remuneration.
Remuneration
Committee
B.1.1
Complied.
The Remuneration Committee is responsible for assisting the
Board with regard to the remuneration policy for the Executive
Directors and management.
Composition of
the Remuneration
Committee
B.1.2
&
B.1.3
Complied.
All members of the Remuneration Committee are Non- Executive
Directors. Details of the remuneration committee are given in
the Remuneration Committee report on page 90.
Remuneration of
Non-Executive
Directors
B.1.4
Complied.
The Board as a whole decides the remuneration of the NonExecutive Directors. The Non-Executive Directors receive a fee
for being a Director of the Board and fee participating as a sub
committee member.
Consultation of
the Chairman
and access to
professional advice.
B.1.5
Complied
Input of the Chairman is obtained as the Chairman of the said
Sub Committee. External professional advice is sought on a
need basis.
B.2 The level and make up of remuneration
The level of remuneration of both Executive and Non-Executive Directors should be sufficient to attract and retain
the Directors needed to run the company successfully. A proportion of Executive Directors remuneration should be
structured to link rewards to corporate and individual performance.
Level and makeup
of the remuneration
Chief Executive
Officer /Executive
Director
B.2.1
Complied.
The remuneration scheme for Executive Directors is structured
to align rewards to their individual and Corporate performance
targets.
United Motors Lanka PLC | Annual Report 2013/14 79
Corporate governance contd.
Corporate
Governance
Principles
SEC & CA Sri
Lanka Code
Reference
Compliance
Status
Details of Compliance
B) Directors’ remuneration Contd.
Comparison of
remuneration with
other companies
B.2.2
Complied.
Salaries surveys are carried out to identify the salary levels
relative to the other companies for decision making.
Comparison of
remuneration with
other companies in
the Group.
B.2.3
Complied.
Salary increments are based on performance appraisals.
Performance related
payments to Chief
Executive Officer /
Executive Director
B.2.4
Complied
The performance related payments for Executive Directors is
structured to align with individual and Corporate performance
targets.
Executive share
options
B.2.5
Not applicable.
The Company does not have share option schemes for
Executives.
Deciding the
Executive Directors
remuneration
B.2.6
Complied.
In deciding the remuneration of Executive Directors provisions
set of in Schedule E of the Code is followed.
Early termination of
directors
B.2.7
Not applicable
Only applicable to the Executive Directors and terms of
employment is governed by the contract of service.
Early termination
not included in the
initial contract
B.2.8
N/A
As above.
Remuneration of
Non-Executive
Directors
B.2.9
Complied.
Non-Executive Directors fee are compared with the market rates.
B.3 Disclosure of remuneration
The Company’s Annual Report should contain a statement on remuneration policy and details of remuneration of the
Board as a whole.
Disclosure of
remuneration
B.3.1
Complied
Details are given in Remuneration Committee Report given on
page 90.
The remuneration paid to Board of Directors is disclosed in
aggregate in Note 12 to the financial statements.
C) Relationships with shareholders
C.1. Constructive use of the AGM and conduct of General Meetings
Board should use the AGM to communicate with shareholders and should encourage their participation
Use of Proxy votes
C.1.1
Complied
The Company record all proxy votes and proxy votes lodged for
each resolution.
Separate resolution
for all separate
issues
C.1.2
Complied
Separate resolutions for each item are proposed giving
opportunity to vote on each matter separately.
Availability of
all Board Sub
Committee
Chairman at the
AGM.
C.1.3
Complied
At each AGM, the Board presents a business review to all
shareholders who request for clarifications. Further, the
Company ensures the availability of Chairman/Chairperson of
sub committees to answer questions at AGM.
Adequate notice of
the AGM
C.1.4
Complied
In terms of the provisions of the Companies Act, notice of
meeting is circulated fifteen working days prior to the AGM.
80 United Motors Lanka PLC | Annual Report 2013/14
Corporate
Governance
Principles
SEC & CA Sri
Lanka Code
Reference
Compliance
Status
Details of Compliance
C.1. Constructive use of the AGM and conduct of General Meetings Contd.
Procedures of voting
at general meetings
C.1.5
Complied
A copy of the Annual Report is dispatched together with the
notice of meeting.
A summary of the procedures governing voting is indicated
separately in the notice of meeting and the proxy form.
C.2. Communication with shareholders
The Board should implement effective communication with shareholders.
Channel to reach all
shareholders of the
company
C.2.1
Complied
The primary modes of communication between the Company
and the shareholders are the Annual Report and AGM.
Copies of Annual report, interim reports, stock exchange
announcements etc are posted on the Company’s website.
Policy and
methodology for
communication with
shareholders
C.2.2
Complied
The Company focuses on open communication and fair
disclosures with emphasis on the integrity, timeliness and
relevance of the information provided.
Implementation
of the policy and
methodology for
communication
with shareholders
C.2.3
Complied
Shareholder communication policy is in place.
Contact person
in relation to
shareholders
matters
C.2.4
C.2.6
Complied.
Shareholders may, at any time, direct questions, request for
publicly available information and provide suggestions to
Directors or management of the Company. Such questions,
requests and suggestions should be addressed to the Company
Secretary.
Process to make
all Directors aware
if major issues
and concerns of
shareholders
C.2.5
Complied
The Company Secretary maintains records of all
correspondence received and will deliver as soon as practical
such correspondence to the Board or individual Director/s as
applicable and the Board or individual director/s will respond to
the shareholders and will direct the Company Secretary to send
the response to the shareholder.
The process
responding to
shareholder matters
C.2.7
Complied
Refer above.
C.3 Major and material transactions
As per the requirement of Companies Act, Directors should disclose to shareholders, all proposed material
transactions which would materially alter/vary the Company/Group’s net asset base.
Major and material
transactions
C.3
Complied
In terms of the requirements pertaining to immediate
disclosures, the Company always notify the Colombo Stock
Exchange about the relevant transactions as soon as they
are approved by the Board of Directors in order to ensure
dissemination to the public.
Major transactions
C.3.1
N/a
No major transactions took place during the year which
materially affected the net assets.
United Motors Lanka PLC | Annual Report 2013/14 81
Corporate governance contd.
Corporate
Governance
Principles
SEC & CA Sri
Lanka Code
Reference
Compliance
Status
Details of Compliance
D) Accountability and Audit
The Board should present a balanced and understandable assessment of the Company’s financial position,
performance and prospects
Statutory and
regulatory reporting
D.1.1
Complied
In the preparation of quarterly and annual financial statements
UML has complied with the requirements of Companies Act
No 07 of 2007, Sri Lanka Accounting Standards, reporting
requirements prescribed by the regulatory authorities.
Directors report in
the annual report
D.1.2
Complied
The annual report of the Board of Directors on the affairs of
the Company is given on pages 97 to 102 covers all disclosure
requirements.
Statement
of Directors
and Auditor’s
responsibility
for the financial
statements
D.1.3
Complied
Statement of Directors’ responsibility for financial reporting is
given on page 104.
The Directors’ statement on internal controls is given on
page 105.
Auditors’ responsibility on financial statements is given on
page 107.
Management
discussion and
analysis
D.1.4
Complied
Management review includes group overview, operational review
and financial review.
The management discussion and analysis is given on pages 20
to 37.
Declaration by the
Board that the
business as a going
concern
D.1.5
Complied
This declaration is made in the “Annual Report of the Board of
Directors on the affairs of the Company” on page 102.
Summoning an EGM
to notify serious loss
of capital
D.1.6
Not applicable
Likelihood of such occurrence is remote.
Related party
transactions
D.1.7
Complied
Process for identifying, recording and disclosure of related
party transactions are in place. All related party transactions
as defined in Sri Lanka Accounting Standard 24- Related party
transactions is disclosed in note 38 to the financial statements.
D.2 Internal control
The Board should maintain a sound system of internal control and a process for risk management to safeguard
shareholders’ investments and the Company’s assets.
Internal control
D.2
Complied.
The Company’s prevailing internal control systems are reviewed
by the internal audit and periodical reports are submitted to the
Audit Committee.
Annual evaluation of
the risks facing the
Company and the
effectiveness of the
system of internal
control
D.2.1
Complied
The Board is responsible for establishing a sound framework
of risk management and internal controls and monitoring its
effectiveness on a continuous basis.
Internal audit
function
D.2.2
Complied
UML has its in-house internal audit function.
82 United Motors Lanka PLC | Annual Report 2013/14
Corporate
Governance
Principles
SEC & CA Sri
Lanka Code
Reference
Compliance
Status
Details of Compliance
D.2 Internal control Contd.
Review of the
process and
effectiveness of risk
management and
internal control
D.2.3
Complied
The internal audit division of the Company carries out regular
reviews risk management and internal controls including
internal controls over financial reporting which is reviewed and
monitored by the Audit Committee.
Responsibilities
of Directors in
maintaining a sound
system of internal
control
D.2.4
Complied
The Directors’ responsibility for maintaining a sound system of
internal control is given in the Directors’ statement on internal
control on page 105.
D.3. Audit Committee
The Board should establish formal and transparent arrangements in selecting and applying accounting policies,
financial reporting and internal control principles and maintain an appropriate relationship with the Company’s
external auditors.
Composition of the
Audit Committee
D.3.1
Complied
Audit Committee Chairperson and other two members are NonExecutive Directors. The details of the composition of the Audit
Committee are given on page 92.
Review of objectivity
of the external
auditor
D.3.2
Complied
The Audit Committee monitors and reviews the external
auditor’s independence, objectivity and the effectiveness of
the audit process taking into account relevant professional and
regulatory requirements.
The Audit Committee is responsible for making
recommendations on the appointment, reappointment and
or removal of the external auditors in-line with professional
standards and regulatory requirements.
Terms of reference
of the Audit
Committee
D.3.3
Complied
The Audit Committee is guided by the committee charter which
sets out the responsibilities of the committee. The terms of
reference was reviewed in 2014.
Details of the Audit Committee are given on page 92.
Disclosures of Audit
Committee
D.3.4
Complied.
The names of the members of the Audit Committee are given in
the Audit Committee Report on page 92.
In order to safeguard the objectivity and independence of the
external auditor, the Audit Committee reviewed the nature and
scope taking account of the regulations and guidelines stated in
Section D.3.2.
D.4 Code of Business Conduct & Ethics
The Company should develop a Code of Business Conduct and ethics for Directors and members of the senior
management committee.
Code of business
conduct and ethics
D.4.1
Complied.
A Code of Business Conduct & Ethics is in place. Details
addressed in the Code are given on pages 73 and 74.
United Motors Lanka PLC | Annual Report 2013/14 83
Corporate governance contd.
Corporate
Governance
Principles
SEC & CA Sri
Lanka Code
Reference
Compliance
Status
Details of Compliance
Complied.
The Board is not aware of any material violations of any of the
provisions of the Code of business conduct and ethics by any
Director or Senior Management committee of the Company.
D) Accountability and Audit Contd.
Affirmation by the
Chairman that there
is no violation of the
code of conduct &
ethics
D.4.2
D.5 Corporate governance disclosures
The company should disclose the extent of adoption of best practice in corporate governance
Disclosure
of corporate
governance
D.5.1
Complied
The Annual Report deals with the extent to which Company has
complied with the requirements of the Code of Best Practices
on Corporate Governance issued by SEC and CA Sri Lanka and
compliance with regulations of the section 7.10 of the listing
rules of Colombo Stock Exchange.
E) Institutional investors
E.1 Shareholder voting
Institutional shareholders are responsible to make considered use of their votes and encouraged to ensure their voting
intentions are translated into practice.
Institutional
shareholders
E.1.1
Complied
The Company’s performance is well communicated to the
shareholders at the AGM. All other formal and informal
suggestions and views of shareholders are conveyed to the
Board.
E.2 Evaluation of governance initiatives
When evaluating companies’ governance arrangements, institutional investors should be encouraged to give due weight
to all relevant factors drawn to their attention
Evaluation of
E.2
Complied
Institutional investors are encouraged to provide any feedback
on the governance related issues.
F.1
Complied
The Company’s Annual Report provides adequate information
to Shareholders to make judgments or to seek clarifications on
their investment decisions.
F.2
Complied
Notice of meeting is sent to all shareholders on time to
encourage their participation at the Annual General Meeting and
exercise their voting rights. In case of appointing a proxy, the
proxy form and instructions are given in the annual report.
governance
initiatives
F) Other investors
F.1 Investing/ divesting decision
Investing/ divesting
decisions
F.2.Shareholder voting
Individual
shareholder voting
84 United Motors Lanka PLC | Annual Report 2013/14
Corporate
Governance
Principles
SEC & CA Sri
Lanka Code
Reference
Compliance
Status
Details of Compliance
To be complied
with in
2014/15.
Although the engagement with different stakeholders is
disclosed in the sustainability report on pages 40 to 58, a
Sustainability Reporting Framework has not been applied in
preparing this annual report.
G) Sustainability reporting
Principles of
sustainability
reporting
G.1
Economic
sustainability
G.1.1
The environment
G.1.2
Labour practices
G.1.3
Society
G.1.4
Product and service
responsibility
G.1.5
Stakeholder
identification
engagement
and effective
communication
G.1.6
Sustainable
reporting and
disclosure
G.1.7
Status of Compliance with the Listing Regulations of Colombo Stock Exchange
CSE Rule
Compliance
Status
Details of Compliance
Complied
The group is in compliance with the corporate
governance rules and any deviations are explained
where applicable.
Complied
Four out of seven Board members are Non-Executive
Directors.
7.10 Compliance
a./b./c./
Compliance with the corporate
governance rules
7.10.1 Non-Executive Directors
a./b./c.
At least 2 members or 1/3 of the
Board whichever is higher should be
Non-Executive Directors.
7.10.2 Independent Directors
a.
2 or 1/3 on Non-Executive Directors
whichever is higher shall be
‘independent’.
Complied
Out of four Non- Executive Directors, three are
independent.
b.
Each Non-Executive Directors
to submit a signed and dated
declaration of his/her independence
/non –independence.
Complied
Non-Executive Directors have submitted
declarations as to their independence.
7.10.3 Disclosures relating to Directors
a./b.
Board shall annually determine the
independence or otherwise of NonExecutive Directors.
Complied
The Board considers Non-Executive Director’s
independence on an annual basis.
c.
A brief resume of each Director
should be included in the annual
report including the director’s
experience.
Complied
Refer Board of Directors on pages 64 and 65.
United Motors Lanka PLC | Annual Report 2013/14 85
Corporate governance contd.
CSE Rule
Compliance
Status
Details of Compliance
Complied
Detailed resume of the new Directors appointed
during the financial year was submitted to the
Colombo Stock Exchange.
Complied
Requirement specified are considered in deciding
the independence.
7.10.3 Disclosures relating to Directors Contd.
d.
Provide a resume of new Directors
appointed to the Board along with
details.
7.10.4 Criteria for defining independence
a. to h.
Requirements for meeting the
criteria to be an independent
director
7.10.5 Remuneration Committee
a.1
Remuneration Committee shall
comprise of Non- Executive
Directors and majority should be
independent.
Complied
Remuneration Committee consist of two
independent Non-Executive Directors.
a.2
One Non-Executive Director shall
be appointed as Chairman of
the Committee by the Board of
Directors.
Complied
Board Chairman is the Chairman of the
Remuneration Committee who is a Non-Executive
Director.
b
Remuneration Committee shall
recommend the remuneration of
the Chief Executive Officer and
Executive Directors.
Complied
Remuneration of Chief Executive Officer / Executive
Director and Executive Directors are recommended
by the Remuneration Committee.
C.1
Names of Remuneration Committee
members
Complied
Refer Remuneration Committee Report on page 90
for the names of the Committee members.
C.2
Statement of remuneration policy
Complied
Refer Remuneration Committee Report for the
remuneration policy.
C.3
Aggregate remuneration paid
to Executive Directors and NonExecutive Directors
Complied
Remuneration paid to Executive and Non-Executive
Directors are disclosed in aggregate in note 12 to
the financial statements.
7.10.6 Audit Committee
a.1.
Audit Committee shall comprise of
Non- Executive Directors, a majority
of who should be independent.
Complied
Audit Committee consists of three Non-Executive
Directors and two are independent.
a.2.
A Non-Executive Director shall be
the Chairman of the committee
Complied
Chairperson of the Audit Committee is a NonExecutive Director.
a.3
Chief Executive Officer and Chief
Financial Officer shall attend Audit
Committee meetings
Complied
Chief Executive Officer/Executive Director and the
Executive Director-Finance, Head of Internal Audit
attend meetings by invitation.
a.4
The Chairman of the Audit
Committee or one member should
be a member of professional
accounting body.
Complied
Chairperson of the committee is a member of the
Institute of Chartered Accountants of Sri Lanka and
a member of the Institute of Certified Management
Accountants of Sri Lanka.
Complied
The Audit Committee oversees the Company’s
financial reporting process to ensure the reliability
of the information provided to the stakeholder.
Appropriateness of the accounting policies adopted,
key judgments and estimates used in preparation
of financial statements and processes by which
compliance with Sri Lanka Accounting Standards
(SLFRSs & LKASs) and other regulatory provisions
relating to financial reporting and disclosures are
reviewed by the Audit Committee.
b. Functions of the Audit Committee
b.1
Overseeing of the preparation
presentation and adequacy
of disclosures in the financial
statements in accordance with
SLFRS/LKAS.
86 United Motors Lanka PLC | Annual Report 2013/14
Status of Compliance with the Listing Regulations of Colombo Stock Exchange contd.
CSE Rule
Compliance
Status
Details of Compliance
b.2
Overseeing the compliance with
financial reporting requirements,
information requirements as per the
laws and regulations.
Complied
The Audit Committee has the overall responsibility
for overseeing the preparation of financial
statements in accordance with the laws and
regulations of the country and also recommending
to the Board, on the adoption of best accounting
policies.
b.3
Ensuring the internal controls and
risk management, are adequate,
to meet the requirements of the
SLFRS/LKAS.
Complied
The committee reviewed the processes for
identification, recording, evaluation and
management of all significant risks.
b.4
Assessment of the independence
and performance of the entity’s
external auditors.
Complied
The Audit Committee assessed the external
auditor’s independence, objectivity and the
effectiveness of the audit process.
b.5
Make recommendations to the
board pertaining to external
auditors.
Complied
The Audit Committee is responsible for making
recommendations on the appointments,
reappointments and removal of the external
auditors in line with professional standards.
c.1
Names of the Audit Committee
members shall be disclosed.
Complied
Names of the Audit Committee members are
disclosed in the Audit Committee report on
page 91.
c.2
Audit Committee shall make a
determination of the independence
of the external auditors.
Complied
The Audit Committee assessed the external
auditor’s independence based on set guidelines and
also obtained a confirmation and concluded that the
external auditors are Independent.
c.3
Report on the manner in which Audit
Committee carried out its functions.
Complied
Refer Audit Committee Report on page 91 for
functions carried out.
United Motors Lanka PLC | Annual Report 2013/14 87
Corporate governance contd.
Details of Board meetings and sub committee attendance
Name of Director
Capacity
Status of
independence
Board meetings
Audit Committee
meetings
Nomination
Committee
meetings
No of meetings
No of meetings
Held
Attended
Held
Attended
Held
Attended
4
1
1
5
1
3
1
Mr. Sunil G.
Wijesinha
Appointed w.e.f. 5
July 2013
Chairman
Non-Executive
Director
Independent
12
12
4
Mr C Yatawara
CEO/Executive
Director
Non
Independent
17
17
5
Mr A W Atukorala
Non-Executive
Director
Independent
17
15
5
Mr A C M Lafir
Executive
Director
Non
Independent
17
17
5
Mr R H Yaseen
Executive
Director
Non
Independent
17
10
Mrs. A H.
Fernando
Appointed w.e.f.
5 July 2013
Non-Executive
Director
Non
Independent
12
12
Mr. M.Sawada
Appointed w.e.f.
29 October 2013
Non-Executive
Director
Independent
8
-
Mr. R. M.S
Fernando
Resigned w.e.f.
10 June 2013
Non-Executive
Director
Independent
2
Mr. T. B.R. B.
Tennekoon
Retired w.e.f. 5
July 2013
Non-Executive
Director
Independent
Mr. S. Nagendra
Retired w.e.f. 5
July 2013
Non-Executive
Director
Independent
Mr. M. Yokoi
Resigned w.e.f.
23 October 2013
Non-Executive
Director
Independent
Chairman of Board/ Board Sub Committee
Remuneration
Committee
meetings
*
*
No of meetings
4
2
1
1
4
4
1
1
4
4
1
1
Mrs. A H.
Fernando
Attended
*1
1
1
1
1
1
5
4
Mr. Sunil G.
Wijesinha
No of meetings
Held
Mr. Sunil
G.Wijesinha
Mr. Sunil
G.Wijesinha
* Attended by invitation
Board positions in listed and unlisted companies
No of Board
seats held in listed
companies
(excluding UML)
Name of Director
Executive capacity
No of Board
seats held in
unlisted
companies
Non-Executive
capacity
Executive capacity
Non-Executive
capacity
Mr. Sunil G. Wijesinha
-
2
1
9
Mr C Yatawara
-
-
-
8
Mr A W Atukorala
-
1
-
4
Mr A C M Lafir
-
-
-
1
Mr R H Yaseen
-
-
-
1
Mrs. A H. Fernando
-
-
1
3
Mr. M.Sawada
-
-
-
-
88 United Motors Lanka PLC | Annual Report 2013/14
Nomination committee report
“The members of the nomination
committee continue to work
closely with the Board of
Directors in reviewing the
structure, size, composition
and skills required for a
steadfast, strong and successful
organisation.”
Composition of the nomination
committee
The Nomination Committee appointed
by the Board of Directors comprised
two (2) Independent Non Executive
Directors (IND/NED), one (1) Non
Independent Non Executive Director
(NIND/NED) and the Chief Executive
Officer/ Executive Director (ED).
Mr. Sunil G. Wijesinha (Chairman)
- (IND/NED)
Mr. A.W. Atukorala
- (IND/NED)
Mr. C. Yatawara
- (ED)
Mrs. A.H. Fernando
- (NIND/NED)
Mr. R.M.S. Fernando who was
the Chairman of the Nomination
Committee resigned with effect
from 10 June 2013. Mr. T.M.R.B.
Tennakoon and Mr. S Nagendra who
were members of the Nomination
Committee did not seek
re-appointment at the AGM held on
5 July 2013.
The Company Secretary acts as the
secretary of the committee.
Scope and responsibility
The Nomination Committee is
established for the purpose of
advising the Board in relation to
nominations, retirement, succession
and training of the board members.
The committee has the authority to
discuss the issues under its purview
and report back to the Board of
Directors with recommendations,
enabling the Board to take a decision.
Meetings
The committee focuses on the
following objectives in discharging its
responsibilities.
Professional Advice
Regularly review the structure,
size, composition and
competencies (including the
skills, knowledge and the
experience) of the Board and
make recommendations to
the Board with regard to any
changes.
To identify and recommend
suitable directors for
appointment to the Board and
board sub committees.
To consider and recommend
(or not recommend) the
re-appointment of current
directors, taking into account
the performance and
contribution made by the
director concerned and provide
advice and recommendations
to the Board on any such
appointment.
To ensure that the directors are
fit and proper persons to hold
office.
A member of Nomination
Committee do not participate in
decisions relating to his/her own
appointment.
To look into and make
recommendations on any other
matters referred to it by the
Board of Directors.
The Nomination Committee met once
during the year. The attendance of the
members at this meeting is given on
page 88 of the annual report.
The committee has the authority to
seek external professional advice on
matters within its purview whenever
required.
Conclusion
The members of the nomination
committee continue to work
closely with the Board of Directors
in reviewing the structure, size,
composition and skills required for
a steadfast, strong and successful
organisation.
Sunil G. Wijesinha
Chairman-Nomination Committee
29 May 2014
United Motors Lanka PLC | Annual Report 2013/14 89
Remuneration committee report
The remuneration policy of
UML PLC is designed to attract,
motivate and retain staff with
the appropriate professional,
managerial and operational
expertise to achieve the
objectives of the company.
Composition
The Remuneration Committee
appointed by and responsible to the
Board of Directors comprised of two
Independent, Non-Executive Directors
(IND/NED).
Mr. Sunil G Wijesinha (Chairman)
- (IND/NED)
Mr. A W Atukorala
- (IND/NED)
Mr. R.M.S. Fernando who was the
Chairman of the Remuneration
Committee resigned with effect
from 10 June 2013. Mr. T.M.R.B.
Tennakoon and Mr. S Nagendra who
were members of the Remuneration
Committee did not seek
re-appointment at the AGM held on 5
July 2013.
By invitation:
Chief Executive Officer/ Executive
Director.
The Company Secretary functions as
the secretary of the Remuneration
Committee.
talent retention and reward.
Recommend to the Board a
competitive remuneration and
reward structure which is linked
to performance.
The committee will specifically
focus on the packages held
out to Chief Executive Officer,
Executive Directors and Key
Management Personnel. Every
member of the staff is informed
of the key performance
indicators on which he/she
will be judged and evaluated
against such key performance
indicators.
Formulate on behalf of the
Board, formal and transparent
procedures for developing policy
on remuneration for Directors,
Chief Executive Officer and Key
Management Personnel .
Evaluate the performance
of Chief Executive Officer,
management development plans
and succession planning.
Approve annual salary
increments, bonuses, changes in
perquisites and incentives.
Professional advice
The committee has the authority
to seek external independent
professional advice on matters within
the purview of the committee and
to invite professional advisors with
relevant experience to assist in various
duties.
Policy
The remuneration policy of UML
PLC is designed to attract, motivate
and retain staff with the appropriate
professional, managerial and
operational expertise to achieve the
objectives of the company.
Scope and responsibility
The scope and the responsibility of
the remuneration committee includes:
Consider internal as well
as external remuneration
factors and ensure that the
remuneration policy of the
company recognizes and
addresses the short and long
term needs of the organization
in relation to performance,
Meetings
During the financial year under review
the committee met once which was
attended by all members of the
Remuneration Committee as given
on page 88. At this meeting, the
performance bonus and its quantum,
annual increments, remuneration and
other benefits of Executive Directors
and Key Management Personnel were
discussed.
Remuneration Package
Employees
Total compensation of an employee
is influenced by a number of
factors such as skills, experience,
responsibility, performance, industry
average and the findings of market
90 United Motors Lanka PLC | Annual Report 2013/14
surveys conducted by selected firm in
every three to four years.
Total remuneration has a fixed
component and a variable component.
Basic salary is the fixed component
of the remuneration and is reviewed
annually based on the rating at annual
performance appraisals.
In addition to the fixed bonus,
the company has implemented a
variable bonus scheme for staff at all
levels, which is based on individual
performance and achievement of
company objectives.
Remuneration and fees paid to
the Directors
Remuneration for Executive Directors
is recommended by the remuneration
committee to the Board. The
remuneration packages awarded to
Executive Directors comprise a mix
of performance related and nonperformance related remuneration
designed to motivate them towards
the achievement of corporate goals.
The remuneration for Non-Executive
Directors reflects the time,
commitment and responsibilities of
their role and is based on industry
and market surveys. They do not
receive any performance or incentive
payments.
Neither the CEO/ED nor any other
directors are involved in remuneration
committee meetings when
determinations are made in respect of
their own performance, compensation
package and fees.
The aggregate remuneration paid to
the Executive Directors and the fees
paid to the Non-Executive Directors
for the board meetings and serving on
board Sub Committee Meetings are
disclosed in page 124 of the annual
report
Sunil G. Wijesinha
Chairman – Remuneration Committee.
29 May 2014
Audit committee report
Composition
The Committee is appointed by the
Board and as at the end of year
comprised of three Non-Executive
Directors and out of which two
Directors are Independent NonExecutive Directors;
Mrs. A. H. Fernando- Appointed w.e.f. 5 July 2013
Mr. Sunil G. Wijesinha
- Appointed w.e.f.5 July 2013
Mr. A .W. Atukorala
Mr. R. M. S. Fernando who was the
Chairman of the Audit Committee
resigned with effect from 10 June
2013. Mr. T.M.R.B. Tennakoon and
Mr. S Nagendra who were members
of the Audit Committee did not seek
reappointment at the AGM Held on 5
July 2013.
Chairperson of the Committee,
Mrs. A.H. Fernando, a Non- Executive
Director is a member of the Institute
of Chartered Accountants of Sri Lanka
and a member of the Institute of
Certified Management Accountants of
Sri Lanka.
Other two members of the Committee
are Independent Non- Executive
Directors. The profiles of the members
are given on pages 64 and 65 to the
annual report.
The Board Secretary functions as
Secretary to the Audit Committee.
Charter of the committee
The Terms of Reference of the
committee are clearly defined in the
Charter of the Audit Committee. The
functions of the Committee are geared
to assist the Board of Directors in
its general oversight on financial
reporting, compliance, internal
controls, and internal and external
audit functions.
“Rules on Corporate Governance
under Listing rules of the Colombo
Stock Exchange ” and “Code of Best
Practice on Corporate Governance”
issued jointly by The Institute
of Chartered Accountants of Sri
Lanka and Securities and Exchange
Commission of Sri Lanka further
regulate the composition, role and
functions of the Audit Committee.
The Charter was revised in 2014
and this process ensures that new
developments and concerns are
adequately addressed.
Meetings
During the financial year ended 31
March 2014, the committee held
five meetings. The attendance of the
members at these meetings is stated
in the table on page 88 of the annual
report.
The Chief Executive Officer, Executive
Director- Finance and the Head of
Internal Audit attended all audit
committee meetings by invitation.
When required, other senior officers of
the Company and its subsidiaries are
invited to attend these meetings. The
engagement partner of the Company’s
external auditors attends meetings
when matters pertaining to their
functions come up for consideration
and attended three meetings during
the year.
Role of the committee
The Audit Committee assists the
Board of Directors to effectively
carry out its supervisory oversight
responsibilities on financial reporting
and compliance, internal controls
and risks, internal and external audit
functions of the Company and its
Subsidiaries.
The Committee is empowered to;
Ensure that efficient and sound
financial systems are in place
and are well managed in order
to give accurate, appropriate
and timely information to the
Board of Directors, Regulatory
Authorities, the Management
and other Stakeholders.
Review the quality and the
appropriateness of Accounting
Policies and their adherence
to statutory and regulatory
compliance requirements
and applicable Accounting
Standards.
Ensure that the Company has
adopted and adhere to policies
which firmly commits to achieve
highest ethical standards, good
industry practices and in the
best interest of all Stakeholders.
Examine the adequacy ,
efficiency and effectiveness of
the management processes in
place to identify , avoid and
mitigate risks.
Review internal and external
audit reports and follow
up on their findings and
recommendations.
Assess the independence
and monitor the performance
and functions of internal and
external auditors.
Financial reporting
The Audit Committee supports the
Board of Directors to oversee that the
Company’s financial reporting gives
a true and fair view based on the
accounting records and in accordance
with the stipulated Sri Lanka
Accounting Standards. Accordingly,
the committee reviewed the following;
Adequacy and effectiveness of
the internal controls, systems,
and procedures to provide
reasonable assurance that all
transactions are accurately
and completely recorded in the
books of accounts.
Effectiveness of the financial
reporting systems in place
to ensure reliability of the
information provided to the
stakeholders.
Appropriateness of the
accounting policies adopted,
key judgments and estimates
used in preparation of financial
statements and processes by
which compliance with Sri Lanka
Accounting Standards (SLFRSs
& LKASs) and other regulatory
provisions relating to financial
reporting and disclosures.
United Motors Lanka PLC | Annual Report 2013/14 91
Audit committee report contd.
Prior to submission to the
Board, reviewed the quarterly
accounts and annual report.
Risks and internal controls
The effectiveness of the Company’s
internal controls and risk management
processes are assessed mainly by the
reports submitted by the internal and
external auditors. Directors’ statement
on Internal Control is given on
page 105.
A risk based audit approach is used to
assess the effectiveness of the internal
control procedures in place to identify
and manage all significant risks. A risk
matrix has been adopted for assessing
and measuring the operational risks
identified during the internal audit
reviews.
The Committee reviewed the
processes for identification, recording,
evaluation and management of all
significant risks. Required assurances
were obtained from the divisional
heads on the remedial action in
respect of the identified risks in
order to maintain the effectiveness of
internal control procedures in place.
Regulatory compliance
A procedure has been laid down for
reporting on the statutory compliance
of the Company and its subsidiaries.
This report is certified by the internal
audit division on a monthly basis.
Instances of non-compliance if any
are reported in a specific format to
the board on a monthly basis. Such
reported exceptions are followed up to
ensure appropriate corrective action
is taken.
Internal audit
The Audit Committee exercises
oversight over the internal audit
function. The committee approves
the annual internal audit programme
and reviews the reports presented
by internal audit concerning
operational issues and effectiveness
of internal control systems. These
reviews examine management’s
responses to the issues raised as
well as the implementation plans.
The processes and the frequency of
audits is dependent on the risk level,
with higher risk areas being audited
more frequently and audit findings
presented in the reports were rated
accordingly.
External audit
The external auditors were given
adequate access by the committee
to ensure they had no cause to
compromise their independence and
objectivity. Prior to commencement
of the annual audit, the committee
discussed with the external auditors
their audit plan, audit approach and
procedures and matters relating
to the scope of audit. The fees of
the external auditors were also
approved by the audit committee. The
audit results were discussed at the
conclusion of the audit, where the
committee reviewed and approved
the annual consolidated financial
statements.
The audit committee also reviewed
the external auditor’s management
letter of the previous year with the
management’s responses thereto. The
committee also reviewed the nonaudit services provided by the external
auditors with the aim of assessing
the independence and objectivity of
the external auditor. Having reviewed
these, the committee is satisfied that
the non-audit service provided by the
external auditors does not impair
their independence. The committee
has also received a declaration from
the external auditors as required by
the Companies Act No 07 of 2007,
confirming that they do not have
any relationship or interests in the
company which may have a bearing on
their independence.
The audit committee has
recommended to the board, Messrs
KPMG, Chartered Accountants be
re- appointed as statutory auditors
for the financial year ending 31 March
2015 subject to the approval by the
shareholders at the forthcoming
Annual General Meeting.
92 United Motors Lanka PLC | Annual Report 2013/14
Good governance
The committee also reviewed the
level of compliance with corporate
governance rules as per Sec 7.10
of the Listing Rules of the Colombo
Stock Exchange and Compliance
with the Code of Best Practice on
Corporate Governance and is satisfied
that the Company has complied with
mandatory requirements.
Conclusion
Based on the review of reports
submitted by the external and
internal auditors and the information
received during the deliberations,
the committee is satisfied that the
internal controls and procedures in
place are adequately designed and
have been operating effectively to
provide reasonable assurance that the
company’s assets are safeguarded
and that steps are being taken to
continuously improve the control
environment. The committee is also
satisfied that the financial position of
the company is regularly monitored
and that the company has adopted
appropriate accounting policies and
the financial statements are reliable.
Mrs. A. H. Fernando
Chairperson - Audit Committee
29 May 2014.
Enterprise risk management
Overview
Risk can be defined as the probability
of threat of loss, liability, damage
or any other negative occurrence
that is caused by external or internal
vulnerabilities. The constantly evolving
environment and the interactions with
our stakeholders present the company
with risks and opportunities and could
have a significant impact on business
if not managed efficiently.
Risk management, is the process
of analysing exposure to risk by
identifying vulnerabilities and their
probability of outcome in order
to determine how best to handle
such exposure. It also looks at
implementing various policies,
procedures and practices to identify,
analyse, evaluate and monitor risk
followed by identifying solutions
to minimize the probability of
occurrence and / or the impact of the
identified risks.
With the ever evolving international
and domestic markets, risk
management become even more
important and the failure to
implement the above measures
could result in financial losses,
lost opportunities and in extreme
cases even corporate failure. Thus
effective risk management is critical
in achieving the Company’s strategic
objectives in a highly competitive and
uncertain environment.
Risk mapping
Each risk is reviewed in terms of
business impact and likelihood of
occurrence of event/events:
Likelihood of occurrence is
assessed on the basis of past
experience and the mitigating
controls that are in place. A
rating of high, medium and
low in terms of probability of
occurrence is assigned for each
risk.
The impact of the event is
assessed by determining
the loss it would cause and
the extent of the impact. By
considering these two factors,
the impact is then categorized
as low, moderate and significant.
Senior managers / divisional heads
in each division identify risk in their
respective areas.
The Audit Committee has been
delegated with the responsibility for
reviewing the effectiveness of the
Company’s risk management process,
including the systems established to
identify, assess, manage and monitor
risks. The internal audit division also
plays a key role in risk identification.
The Board is primarily responsible for
ensuring that the risks are identified
and appropriately managed across the
Company.
Upon assessment of the likelihood
of occurrence and the extent of the
impact of each risk, it is subjected
to the following matrix in order to
derive the nature and extent of action
required.
Risk management structure and process
Risk
appetite and
framework
Board
3rd Line
independent
assurance
Risk
reporting
2nd Line
Group-wide
policies and
standards
Audit Committee
Risk
acceptance and
monitoring
Group risk
Divisional risk
Divisional risk
appetite and
policies
1st Line
Business units (Risk Origination within risk appetite)
Risk
identification,
evaluation and
management
United Motors Lanka PLC | Annual Report 2013/14 93
Enterprise risk management contd.
Risk management is an
integral part ensuring
the sustainable growth.
The risk management
process seeks to create
and protect value of all
stakeholders
Impact
Risk management action
Significant
Considerable
management
required
Must manage
and monitor risks
Extensive
management
essential
Moderate
Risks may be
worth accepting
with monitoring
Management
effort worthwhile
Management
effort required
Low
Accept
risks
Accept, but
monitor risks
Manage and
monitor risks
Low
Medium
High
Likelihood
Key risks
Key risks identified can be broadly categorized as below;
High
Medium
Low
Business environment
Fraud risk
Exchange rate risk
Interest rate risk
Equity price risk
Falling customer satisfaction
Product portfolio risk
Relationship with principals
Human resource risk
Information technology risk
Liquidity risk
Credit risk
Risk of technological obsolescence
Regulatory risk
Reputational risk
Environmental risk
Risk of natural disasters
Business environment
Government fiscal policies, lending by
banks and leasing companies have an
impact on the consumer purchasing
power which in turn impacts the
revenue. This has a significant impact
on cash flows, profitability, risk of
bad debts and ageing of inventories.
The socio economic and political
environment has an impact on the
business as well as the investment
climate.
The changing demand patterns
due to cost implications of high
government fiscal levies, rising fuel
prices, volatile exchange rates and
increasing trend in the interest rates
require a prudent approach to product
and growth planning. The Company
recognizes this risk as high risk and
pays special attention to changes in
government fiscal policies, competitor
activity, changes in our own and our
competitors’ products and services.
Fraud risk
The risk that internal control
weaknesses may lead to
misappropriation of assets or
fraudulent Financial reporting.
Authority limits, segregation of
duties and access controls have been
implemented for all critical processes
of the Company. Key controls are
reviewed periodically and internal
auditors conduct regular reviews of
areas which are susceptible to fraud
and a risk based audit approach is
applied. The Company has a process
by which any employee, who suspects
wrongdoing at work, can report their
concerns directly to the internal
94 United Motors Lanka PLC | Annual Report 2013/14
audit division through an internal
whistle blowing procedure. Any
complaints received from customers
regarding malpractices or fraud by any
employee, is investigated immediately.
The Company adopts a zero tolerance
policy in the case of fraud.
Exchange rate risk
As all our products are imported, the
movement of the rupee against the
Japanese Yen and US Dollar affects
the product acquisition costs and the
customer purchasing power.
The movement of exchange rates
of currencies such as the Japanese
Yen and the US Dollar are monitored
on a daily basis for the fluctuation
in rates. Where required, corrective
actions are taken to ensure that the
Company benefits from the changing
value of exchange rates. Best possible
rates are negotiated with banks
for settlements of bills. Hedging
techniques such as forward contracts
are also used to minimise the currency
losses where required.
Interest rate risk
The Company’s interest rate risk
arises mainly from the short term
borrowings and investment of excess
funds in financial instruments.
Prime lending rates and deposit rates
are frequently reviewed and the most
competitive bank is selected for better
investment options. The Company
monitors interest rate risk by actively
monitoring the yield curves trends
and interest rates movements. The
Company’s reputation, strong financial
standing and excellent relationships
with our bankers ensure that we
borrow at the most competitive rates.
In order to minimize the adverse
impact of fluctuating interest rates,
fund requirements and due dates
of import loans are planned on a
weekly basis, and monitored daily.
This ensures that loans with higher
interest rates are repaid first and
thereby interest cost is reduced and
borrowings are kept at minimum
at optimum gearing level. All our
overnight balances are automatically
transferred to an interest earning call
deposit account.
Equity price risk
Listed equity securities are susceptible
to market price risks arising from
uncertainties of future values of the
investment securities which are known
as equity price risk.
The Company manages the equity
price risk through diversification of its
portfolio to different business sectors.
Equity investment decisions are based
on fundamentals rather than on
speculation and decisions are taken
based on in-depth analysis of industry
and macroeconomics analysis as well
as research reports on the company
performance. Purchase and timely
exit decisions are taken to maximize
profits.
Falling customer satisfaction
For a profit making entity, customers
are vital to the Company. Customer
satisfaction is the key to growth.
Loss of customers and customer
dissatisfaction may result in a
financial loss to the Company. Such
a situation could affect turnover and
hinder the growth as well as potential
customers.
Customer relationship management
is led by a dedicated team and
continuous training is carried out on
customer care. The level of customer
relationship management is also
considered in employee evaluations.
Product portfolio risk
Our revenue is predominantly from
automobile industry. Although the
Company has taken steps to diversify
its product portfolio in recent years
it is still heavily dependent on the
automobile industry. The Company’s
future strategy will be directed
towards reducing the imbalance in
the product portfolio and reduce
dependence on the motor industry.
We have a strong product portfolio
that caters to almost all customer
segments and this along with further
diversification of our product range
will give us the opportunity to be more
competitive in our industry.
Relationship with principals
Disruptions to business relationship
with principals could have negative
effects on the performance and
growth.
The company has focused on
developing a mutually beneficial
relationship with principals in an
effort to minimize the risk. Emphasis
is placed on meeting expectation of
principals.
Human resource risk
Main human resource risks are the
shortage of qualified personnel with
required calibre and the inability to
retain skilled employees.
Human resource policies are geared
to encourage continuous education
for all levels of staff. Managers
are required to identify / provide
relevant training and development
opportunities and foster a culture
where all employees, regardless of
rank, can actively contribute to the
business. Some of the initiatives taken
are to provide adequate monetary and
non-monetary incentives, implement a
succession plan for senior level staff,
identify opportunities for job rotation,
review remuneration against industry
norms, talent management initiative
to identify and nurture high potential
employees and groom them to take
additional responsibilities and look to
attract high calibre employees from
best available resource pools.
Information technology risk
The Company operates in a fully
integrated system in a networked
environment. Maintaining
confidentiality, ensuring availability
and integrity of the data is vital for
the continuity of the business. In
addition, the Company is also exposed
to IT risks such as breakdowns and
disruptions.
The IT security policy addresses
risks associated with the Company’s
information systems. The effectiveness
of information security procedures
and access controls adopted by the
Company against threats from the
external environment and corruption
or loss of information are part of
the audit programme of the internal
auditors. Recommendations made
by the auditors are discussed by the
audit committee and progress on
corrective action is regularly reviewed.
Adequate power and data backup
systems ensure uninterrupted data
transfer between the head office
United Motors Lanka PLC | Annual Report 2013/14 95
Enterprise risk management contd.
and all branches and workshops.
The Company has invested in the
security infrastructure appropriate
for the scale of operations. Security
arrangements cover both physical
infrastructure and information and are
constantly updated to take account
of the latest knowledge and technical
enhancements. Security controls
cover technical aspects as well as
organizational measures including
tracking, staff training, end user
computer policies etc.
Liquidity risk
Liquidity risk arises when the
Company may not have sufficient
liquid financial resources to meet its
obligations when they fall due.
Cash flow forecasting is performed by
the finance division to ensure it has
sufficient cash to meet operational
requirements. Surplus cash is
invested in financial instruments
after considering the interest rates
and maturities for better investment
options. The Company’s borrowings
are always maintained within the
borrowing powers granted by our
Articles of Association and reported to
the Board of Directors, monthly.
when required based on periodic
turnover and settlement patterns
helps to minimize the risk of default.
All trade debts are monitored by
the Divisional Heads at monthly
meetings with divisional staff. At
these meetings corrective actions
to be taken on overdue debts are
discussed and thereafter regularly
followed up. The monthly report to
the Board of Directors includes an
age analysis of debtors and focus on
long outstanding balances. Credit is
suspended on overdue accounts and
legal procedures are taken to recover
long overdue receivables.
The credit worthiness of a debt
security investment is assessed
mainly through ratings assigned to the
issuing institutions.
Risk of technological
obsolescence
Non availability of latest technology
will expose the Company to lose
business to its competitors. It is vital
that the Company is up-to-date with
technology offering with regards to
its products and services in order
to compete with the competitors in
the industry and could result in a
reduction in market share.
Credit risk
Credit risk arises from credit exposure
to customers on unsecured debts.
Also exposures the Company when
cash and cash equivalents, deposits/
investments held with banks and
financial institutions fails to discharge
its contractual interest or principal on
their debt obligations due to declining
financial strength.
The Company has taken several
measures to mitigate losses due
to the failure of customers to
meet their debts obligation. Prior
to approving credit, a customer is
subject to a process of evaluation to
establish credit worthiness. Careful
settings of credit limits based on the
Company’s credit policy initially and
thereafter increase the credit limits
The Company makes regular
investment in new technology to
upgrade after sales service. Staff are
constantly exposed to new technology
and trained to handle them.
off by the relevant management and
checked by the internal audit on a
monthly basis. A summary of the
checklist is presented at monthly
Board meeting.
Reputation / societal risk
Reputational risk could be defined
as the risk that a particular event or
behaviour could affect and negatively
impact stakeholders’ perceptions,
thus impairing its ability to operate
effectively.
All possible steps are taken to
safeguard and enhance our reputation
as a leading business organization
which is professionally administered
based on an ethical corporate culture
that is transparent and socially
responsible. The Company engages in
various community related activities.
Environmental risk
Environmental risk is the probability
of the Company’s operations
being affected owing to adverse
environmental impacts caused
through human activity. Nonacceptance of the Company as a
responsible corporate citizen can lead
to loss of confidence on the Company
and consequently loss of business
opportunities in the short –term,
as well depletion of the Company’s
image.
Environmental factors are considered
in decision making.
Regulatory risk
Risk of natural disasters
Regulatory risk may arise if the
Company is not able to comply with
regulatory requirements which may
change from time to time, or is not
compliant with existing regulations.
Damages from fire and flood have
been identified as key disaster related
risks that the Company is exposed
to which can adversely affect the
continued operation of the business.
The Company representatives
are actively involved in reviewing
regulatory changes and assessing the
business impact of such proposals. A
comprehensive compliance checklist
has been developed and is signed
As in previous years all tangible assets
have been insured against identified
risks. All insurance policies of the
company is reviewed annually and
adjustments made where required.
96 United Motors Lanka PLC | Annual Report 2013/14
Annual report of the board of directors
1.
General
The Board of Directors of United
Motors Lanka PLC have pleasure
in presenting to its members their
report together with the audited
financial statements for the year
ended 31 March 2014. United Motors
Lanka PLC is a public limited liability
company incorporated in Sri Lanka on
09 May 1989 under the Companies
Act No.17 of 1982, The ordinary
shares of the company were listed in
the Colombo Stock Exchange in 1989.
The company was re-registered as per
the Companies Act No. 07 of 2007, on
30 August 2007, under the company
registration Number PQ-74. The
registered office of the company is at
100, Hyde Park Corner, Colombo 02,
at which the company’s head office
too is situated.
This report provides the information
as required by the Companies Act
No.07 of 2007, Listing Rules of the
Colombo Stock Exchange and the
Information required to be disclosed as per the Companies
Act No. 07 of 2007
recommended best practices on
corporate governance. This report was
approved by the Board of Directors on
29 May 2014.
The table given below provide the
required and applicable details
or cross reference to disclosures
mandated by the Companies Act
No.07 of 2007:
Reference to the
Companies Act
The nature of the business of the group and the company together with any
change thereof during the accounting period
Section 168 (1) (a)
Signed financial statements of the group and the company for the accounting
period completed
Section 168 (1) (b)
Page
Reference
98
109
Auditor’s report on financial statements of the group and the company
Section 168 (1) (c)
107
Accounting policies and any changes therein
Section 168 (1) (d)
98
Particulars of the entries made in the interest register during the accounting
period
Section 168 (1) (e)
Remuneration and other benefits paid to directors of the company and its
subsidiaries during the accounting period
Section 168 (1) (f)
Amount of donations made by the company and its subsidiaries during the
accounting period
Section 168 (1) (g)
Information on directorate of the company and its subsidiaries during and at
the end of the accounting period
Section 168 (1) (h)
Disclosure on amounts payable to the auditors as audit fees and fees for
other services rendered during the accounting period by the company and its
subsidiaries
Section 168 (1) (i)
Auditor’s relationship or any interest with the company and its subsidiaries –
audit fee/non-audit fee
Section 168 (1) (j)
Acknowledgement of the contents of this report/signatures on behalf of the
Board
Section 168 (1) (k)
2.
Review of business
Vision, mission and corporate
conduct
The company’s vision and mission are
given on page 2 of the annual report.
The business activities of the company
are conducted maintaining the highest
level of ethical standards at all times.
Review on operation of the company
and the group
The “Chairman’s Report” on pages
10 to 13 and the “Chief Executive
Officer’s Review of operations” on
pages 14 to 19 which forms an
integral part of this report provides
an overall assessment on the financial
performance and financial position
98
124
124
100
125
101
102
of the company and its subsidiaries
and jointly controlled entities and
describes in detail its affairs and
important events for the year. A
detailed analysis of the operations
and financial results is contained in
the “Management Review” on pages
20 to 37 of this report.
United Motors Lanka PLC | Annual Report 2013/14 97
Annual report of the board of directors contd.
Principle activities of the company and the group
United Motors Lanka PLC
United Motors Lanka PLC continues as the sole distributor for brand new Mitsubishi
and Fuso vehicles, genuine Mitsubishi spares and provide after sales services to
Mitsubishi & Fuso vehicle owners at Colombo and at its branches outstation.
The company continues to market Valvoline Lubricants and Eagle One Car Care
products from USA.
Subsidiary Companies
Unimo Enterprises Limited
The company is engaged in the import and distribution of Perodua vehicles from
Malaysia, Zotye Sports Utility and Commercial Vehicles, JMC Cabs, Morris Garages
(MG) cars from China and Yokohama Tyres from Japan.
The company is also engaged in the assembly and marketing of Zotye Extreme sports
utility vehicles from China.
Orient Motor Company Limited
The company is engaged in distribution of DFSK Trucks from China and the hiring of
motor vehicles.
UML Property Development
Limited
The company has constructed a warehouse and has leased it to United Motors Lanka
PLC.
UML Agencies & Distributor
(Pvt) Limited
During the year under review the company did not have any commercial transactions.
Jointly controlled entities
TVS Lanka (Pvt) Limited
The company is a joint venture between United Motors Lanka PLC and TVS Group in
India and is engaged in the import and distribution of TVS motor cycles, TVS three
wheelers, spare parts and after sales services to its customers.
TVS Auto Parts (Pvt) Limited
Subsidiary of TVS Lanka (Pvt) Ltd., with a holding interest of 65% of the stated capital
whilst the balance 35% is held externally. The company is engaged in the distribution
of motor vehicle spare parts.
TVS Automotives (Pvt) Limited
TVS Automotives (Pvt) Ltd, is a fully owned subsidiary of TVS Lanka (Pvt) Limited. The
company is engaged in the sales and marketing of MAK Lubricants, JK and TVS Tyres.
There were no significant changes in
the nature of principal activities of
the company and the group during the
financial year under review.
Financial statements
The financial statements of the
company and of the group which are
duly certified by the Executive Director
– Finance, approved by the Board of
Directors and signed by two members
of the Board of Directors including
the Chairman are given on page 109
of the annual report.
Auditors’ report
The company’s auditors M/s
KPMG performed the audit on the
consolidated financial statements
for the year ended 31 March 2014.
The auditors report on the financial
statements is given on page 107 of
the annual report.
Accounting policies and changes
during the year
The company prepared the financial
statements in accordance with Sri
Lanka Accounting Standards (LKAS/
SLFRS). The significant accounting
policies adopted in the preparation
of the financial statements of the
company and the group are given
on pages 112 to 122 of the annual
report.
The Board of Directors wish to
confirm that there were no changes
to the accounting policies used by the
company and the group during the
year.
98 United Motors Lanka PLC | Annual Report 2013/14
Entries in the Interests register
The company, in compliance with
the Companies Act No.07 of 2007,
maintains an interests register. All
related entries were made in the
interests register during the year
under review.
Corporate donations
During the year under review the
company donated a sum of Rs
4,066,500 to charities and our
Corporate Social Responsibility
projects. The donations made to the
government approved charities out of
the above amount was Rs 150,000
Risk management and internal
controls
The Directors periodically review and
evaluate the risks that are faced by
the company. The various exposures
to risk by the company, specific steps
taken by the company in managing
the risks are detailed under the
“Enterprise Risk Management” on
pages 93 to 96 of the annual report.
The Board of Directors, through
the involvement of internal audit
and monitoring department, has
taken steps to ensure and have
obtained reasonable assurance that
an effective and comprehensive
system of internal controls are in
place covering financial, operational
and compliance controls required to
carry on the business in an orderly
manner, safeguard the company’s
assets and to secure as far as possible
the accuracy and reliability of the
financial records.
3.
4.
Future developments
An overview of the future
developments of the company is given
in the “Chairman’s Report”, the “Chief
Executive Officer’s Review” and the
“Management review”.
Revenue
The company achieved a revenue
of Rs. 7.04 billion during the year
ended 31 March 2014. The details of
the revenue by segment, operating
profit and assets allocation are given
under segment reporting - note 43 to
financial statements
Dividends and reserves
Profits and appropriations
The details of the profits relating to
the company and the appropriations
are given in the table:-
For the year ended 31 March
2014
Rs.’000
2013
Rs.’000
Profit for the year before taxation
Income Tax expenses
Profit for the year after taxation
Other comprehensive income
Un-appropriated profit brought forward from previous year
Profit available for appropriation
1,984,058
(501,293)
1,482,765
(8,385)
2,830,564
4,304,944
2,443,045
(556,283)
1,886,762
(12,767)
1,561,973
3,435,968
Appropriations
Dividend paid
11/12 – Rs. 6.00 per share (final)
12/13 – Rs. 3.00 per share (first interim)
12/13 – Rs. 3.00 per share (second interim)
12/13 – Rs. 4.00 per share (final)
13/14 – Rs. 3.00 per share (first interim)
13/14 – Rs. 3.00 per share (second interim)
Un appropriated profit to be carried forward
(201,801)
(269,068)
(201,801)
(201,801)
3,430,473
(403,603)
(201,801)
2,830,564
Dividends
First and second interim dividend of
Rs.3.00 per share each were paid on
04 December 2013 and 25 February
2014, a final dividend of Rs. 6 per
share has been recommended by the
Board of Directors for payment on
07 July 2014, subject to approval by
the shareholders.
Reserves
The total revenue reserves of the
company as at 31 March 2014
amounted to Rs.1,691 million and the
capital reserves of the company as at
31 March 2014 amounted to Rs.1,189
million. Details of the reserves are
shown in the statement of changes in
equity on page 110.
The Board of Directors provided the
statement of solvency to the auditors
and obtained the certificates of
solvency from the auditors in respect
of the interim dividends and would
ensure the compliance of solvency
test after the payment of the proposed
final dividend.
Provision for taxation
Provision for taxation has been
computed at the prescribed rates and
details are given in note 14 to the
financial statements.
5.
Property, plant & equipment
Investment in property, plant and
equipment amount to
Rs. 753,442,000 details of such
investment including the extent,
locations, additions and disposal
of property during the year and the
depreciation charge for the year are
shown in note 17 to the financial
statements.
Details of investment properties
are given in note 18 to the financial
statements.
United Motors Lanka PLC | Annual Report 2013/14 99
Annual report of the board of directors contd.
Market value of property, plant,
equipment and investment property
All freehold lands were revalued by
professionally qualified independent
valuers at regular intervals and
brought into financial statements. The
Directors are of the opinion that the
revalued amounts are not in excess
of the current market values of such
properties. Details of revaluation
of property, plant & equipment and
investment properties are given
in note 17 and 18 to the financial
statements.
6.
Stated capital
The stated capital of the company
as at 31 March 2014 was
Rs.336,335,420 comprising of
67,267,084 ordinary shares. There
have been no change in the stated
capital during the year.
7.
Equitable treatment to
shareholders
The company at all times ensure that
all shareholders are treated equitably.
8.
Share information
Information relating to earnings,
dividends, net assets, market value
per share, other ratios and information
on share trading, the share price
movement is stated in pages 162 and
163 under “share information” section.
Substantial shareholdings
There were 3,501 registered
shareholders as at the balance
sheet date. The distribution of the
shareholding, the details of top twenty
shareholders and the percentage
holding of the public are given in
“share information” section on pages
161 to 164 of this report.
9.
Board of Directors
The Board of Directors of the
company as at 31 March 2014
consisted of seven Directors with
wide knowledge and experience. The
profiles of the Board of Directors are
given in pages 64 and 65. Names of
the Directors who held office as at the
year end are given in the table above:
Name of the Director
Mr. Sunil G.Wijesinha (Chairman)
Mr. C. Yatawara (CEO)
Mr. A.W.Atukorala
Mr. A.C.M. Lafir
Mr. R.H. Yaseen
Mrs. A.H. Fernando
Mr. M.Sawada
IND
NIND
NED
ED
Status
IND/NED
ED
IND/NED
ED
ED
NIND/NED
IND/NED
- Independent Director
- Non Independent Director
- Non Executive Director
- Executive Director
List of Directors of Subsidiaries and
Jointly Controlled Entities of the
company
Names of the Directors of
subsidiaries and jointly controlled
entities of the company are given in
the “Group Structure” on pages 60
and 61.
Re-election of directors
In terms of the Companies Act
No. 07 of 2007 and the Articles of
Association, details of Directors who
retire and seek re-election at the
Annual General Meeting have been
disclosed in the “Notice of Meeting”
on page 169 and the “Proxy Form”.
Resignations/ retirement and
appointments
The information on resignations and
appointments from and to the Board
of Directors are given below;
Directors’ responsibility for financial
reporting
Directors’ responsibility for
financial reporting is explained
in the “Statement of Directors
Responsibilities” on page 104 of this
report.
Mr. R.M.S. Fernando (Chairman)
- resigned from UML and its subsidiaries
w.e.f 10 June 2013
Mr. T.M.R.B.Tennekoon
- did not seek re-appointment at the AGM
held on 05 July 2013
Mr. S. Nagendra
- did not seek re-appointment at the AGM
held on 05 July 2013
Mr. M. Yokoi
- resigned w.e.f. 29 October 2013
Mr. Sunil G.Wijesinha (Chairman)
- appointed w.e.f. 05 July 2013
Mrs. A.H. Fernando
- appointed w.e.f. 05 July 2013
Mr. M. Sawada
- appointed w.e.f. 29 October 2013
Mr. E. Perera
- appointed w.e.f. 27 May 2014
100 United Motors Lanka PLC | Annual Report 2013/14
Directors’ meetings
Directors’ meetings which comprise
board meetings and board subcommittee meetings of audit
committee, remuneration committee,
nomination committee and the
attendance of Directors at these
meetings are given on page 88 of the
annual report.
Directors’ dealings in shares of the
company
Disclosure in respect of Directors’
dealings in shares of the company
during the year and their shareholding
as at 31 March 2014 have been
disclosed in “share information” on
page 164.
Directors’ interests in contracts with
the company
Directors’ interests in contracts or
proposed contracts with the company,
both direct and indirect are disclosed
in the related party transactions under
note.38 to the financial statements.
Directors have no direct or indirect
interest in any other contracts or
proposed contracts with the company
other than those disclosed. As a
practice, Directors have refrained from
voting on matters in which they were
materially interested.
Directors’ remuneration & other
benefits
Details of the remuneration and other
benefits to the Directors are set out in
note 12.1 to the financial statements.
The Directors have not taken any loan
during the year under review.
Board committees
The Board while assuming the overall
responsibility and accountability in
the management of the company has
also appointed board committees
to ensure oversight and control
over certain affairs of the company,
conforming to corporate governance
code and adopting the best practices.
Accordingly, the following committees
have been constituted by the Board:
Audit committee
Members
Mrs. A.H.Fernando (Chairperson)
Mr. Sunil G.Wijesinha
Mr. A.W.Atukorala
The report of the audit committee is
given on page 91 which forms part of
the annual report.
Remuneration committee
Members
Mr. Sunil G.Wijesinha (Chairman)
Mr. A.W.Atukorala
The report of the remuneration
committee is given on page 90 which
forms a part of the annual report.
Nomination committee
Members
Mr. Sunil G.Wijesinha (Chairman)
Mr. A.W.Atukorala
Mr. C.Yatawara
Mrs. A.H.Fernando
The report of the nomination
committee is given on page 89 which
forms a part of the annual report.
10. Auditors
Auditor’s remuneration
The auditors,M/s KPMG were paid
Rs.3,012,000 as fees for audit related
services. In addition they were paid
Rs.374,000 by the company for
permitted non-audit related services.
Auditor’s independence
Based on the declaration provided
by KPMG and as far as the Directors
are aware, the auditors do not have
any relationship or interests with the
company or in any of the subsidiaries
that may have a bearing on their
independence, within the meaning
of the Code of professional conduct
and ethics issued by the Institute of
Chartered Accountants of Sri Lanka.
Appointment of auditors
The retiring auditors M/s KPMG have
expressed their willingness to continue
in office. A resolution to re-appoint
them as auditors and to authorize
directors to fix their remuneration will
be proposed at the annual general
meeting.
12. Environmental protection
The company has made its best
endeavors to comply with the relevant
environment laws and regulations.
The company has not engaged in any
activity that is harmful or hazardous
to the environment and has taken all
possible steps that are necessary to
safeguard the environment from any
pollution that could arise in the course
of carrying out its sales and service
operations.
13. Corporate governance
The company maintains and practices
high principles of good corporate
governance. During the year under
review, the company complied with
all applicable laws and regulations in
conducting its business . A separate
report on” Corporate Governance” is
given on pages 71 to 88 in the annual
report.
14. Our team
The company continues to invest in
human resource development and
implement effective HR practices to
ensure optimum contribution towards
the achievement of its corporate
goals. The number of persons
employed by the company and its
subsidiaries as at the year end was
1,168 ( 2012/2013 - 1,119).The
details of human resources initiatives
are included on pages 46 to 51
respectively.
15. Industrial relations
There have been no material issues
pertaining to employees and employee
relations of the company during the
period under review.
11. Statutory payments
16. Employee Share Trust
The Directors to the best of their
knowledge and belief are satisfied
that all statutory payments due to
the government, other regulatory
institutions and related to the
employees have been made or
provided for during the year under
review.
UML employee Share Trust was
formed with the intention of providing
additional benefits to employees on
retirement/resignation. As per the
amended Listing Rules of Colombo
Stock Exchange section 5.6.10(a),
the Board of Directors decided to
distribute the Trust property among
all eligible employees and to wind up
United Motors Lanka PLC | Annual Report 2013/14 101
Annual report of the board of directors contd.
the share trust within 3 years from 1
March 2012.
Accordingly, in the month of March
2014, 119,082 shares (the shares
already notionally allocated to the
beneficiaries under the trust) were
transferred among 125 employees.
In the month of April 2014, the
unallocated 738,553 shares and
the dividend income( the balance
Trust property) of Rs. 16.54M were
distributed among 465 employees.
20. Outstanding litigation
In the opinion of the Directors and the
company’s lawyers, pending litigation
against the company will not have
a material impact on the financial
results of the company or on its future
operations.
21. Annual General Meeting
The twenty fifth Annual General
Meeting of the company will be held
on 27 June 2014. Notice of meeting
relating to the Annual General Meeting
is given on page 169.
17. Post balance sheet events
In the opinion of the Directors, no
transactions or any other material
events of an unusual nature has arisen
during the period between the end of
the financial year and the date of this
report, other than those indicated in
employee Share Trust above and note
40 to financial statements.
22. Acknowledgement of the
contents of the report
The Board of Directors has approved
the company and consolidated
financial statements on 29 May 2014.
As required by the companies Act
No.07 of 2007, the Board of Directors
does hereby acknowledge the contents
of this annual report.
18. Going concern
The Directors are satisfied that the
company, its subsidiaries and jointly
controlled entities, have adequate
resources to continue in operational
existence for the foreseeable future, to
justify adoption of the going concern
basis. The Directors after making
necessary inquiries and reviews,
including reviews of the group’s
budget for the ensuing year, capital
expenditure requirements, future
prospects and risks, cash flows and
borrowing facilities, have a reasonable
expectation that the company and
the group have adequate resources to
continue in operational existence for
the foreseeable future. Accordingly,
continue to adopt the going concern
basis in preparing the financial
statements.
19. Compliance with laws and
regulations
To the best of the knowledge and
belief of the Directors, the company
has not engaged in any activities
contravening the laws and regulations
of the country.
Signed in accordance with a resolution
adopted by the Directors.
C. Yatawara
Chief Executive Officer/Executive
Director
A.C.M. Lafir
Executive Director-Finance
Mrs. R. M. Hisham
Company Secretary
29 May 2014.
102 United Motors Lanka PLC | Annual Report 2013/14
Financial
calendar
Financial statements 2013/14
First quarter released on
Second quarter released on
Third quarter released on
Fourth quarter released on
-
15
14
07
27
August 2013
November 2013
February 2014
May 2014
-
13th June 2013
-
05 July 2013
27 June 2014
-
19
14
15
04
25
Annual report & accounts
2012/2013
Meetings
Twenty fourth Annual General Meeting
Twenty fifth Annual General Meeting
Dividends
First interim dividend 2012/2013
Second interim dividend 2012/2013
Final dividend 2012/2013
First interim dividend 2013/2014
Second interim dividend 2013/2014
Financial
reports
Statement of director’s responsibility
Directors’ statement on internal controls
CEO and CFO’s responsibility statement
Independent auditor’s report
Statements of comprehensive income
Statements of financial position
Statements of changes in equity
Statements of cash flows
Notes to the financial statements
104
105
106
107
108
109
110
111
112
September 2012
May 2013
July 2013
December 2013
February 2014
Statement of director’s responsibility
The responsibilities of the Directors’
in relation to the financial statements
of the Company and the consolidated
financial statements of the company
and its subsidiaries are set out in this
statement . The responsibilities of
the external auditors in relation to the
financial statements are set out in
“Auditors’ Report” appearing on
page 107.
As per the provisions of the
Companies Act No. 07 of 2007, the
Directors are required to prepare for
each financial year and place before a
general meeting financial statements
which comprise of a statement of
comprehensive income which presents
a true and fair view of the financial
performance of the company and the
group for the financial year, and a
statement of financial position which
presents a true and fair view of the
financial position of the company
and the group as at the end of the
financial year and which complies with
the requirements of the Companies
Act No. 07 of 2007.
The Directors have ensured that in
preparing these financial statements;
the appropriate accounting
policies have been selected and
applied in a consistent manner;
all applicable accounting
standards as relevant have been
applied;
prudent judgment and
reasonable estimates have been
made so that the form and
substance of transactions are
properly reflected; and
compliance with the Companies
Act, Listing Rules of Colombo
Stock Exchange.
Under section 150 of the Company’s
Act No. 07 of 2007, the Directors
of the company are responsible
for ensuring that proper books of
account are maintained to record
all transactions of the company and
its subsidiaries and that financial
statements are prepared for each
financial year to give a true and fair
view of the state of affairs of the
company and the group as at the
end of the financial year and of the
profit or loss for the year. In keeping
with requirement, the company has
maintained proper books of account
and the financial reporting system is
reviewed at regular intervals.
Following a review of the Company’s
financial and related information
including cash flows and borrowing
facilities, the Directors are satisfied
that the company and its subsidiaries
have adequate resources to continue
in business for the foreseeable future.
Accordingly, the financial statements
have been prepared on the basis of a
going concern and the Board accepts
responsibility for the integrity and
objectivity of the financial statements
presented.
The Directors have provided the
company’s auditors, M/s KPMG
with every opportunity to take
whatever steps that are necessary
and appropriate inspections for the
purpose of enabling them to express
their opinion. Accordingly M/s KPMG
has examined the financial statements
made available by the Board of
Directors together with all the financial
records, related information, minutes
of board meetings etc, in order to
express their opinion on financial
statements are given on page 107.
The Directors are aware of the
responsibility to take whatever steps
that are reasonable to safeguard the
assets of the company and that of
the group and in that contexts to have
appropriate internal control systems
to prevent and detect fraud and other
irregularities. The Directors have
accordingly instituted comprehensive
internal control mechanisms to
ensure that as far as it is practically
possible, the Company’s business
is carried out in an orderly manner,
104 United Motors Lanka PLC | Annual Report 2013/14
that its assets are safe guarded and
that the records of the Company or
accurate and reliable. The existences
of such internal controls are regularly
monitored by the Internal Audit
division.
The Board of Directors also wishes to
confirm that , as required by Section
166(1) and 167(1) of the Companies
Act No.07 of 2007, they have
prepared this annual report in time
and ensured that a copy therefore
is sent to every shareholder of the
company.
Further, the Board of Director’s wishes
to confirm that the company has
complied with the requirements under
the Section 07 on the Continuing
Listing Requirements of the Listing
Rules of the Colombo Stock Exchange,
where applicable.
The Directors confirm that to the best
of their knowledge and belief, all taxes
and others statutory dues payable by
the company and all contributions
taxes and levies payable by the
companies within the group on behalf
of and in respect of its employees,
as at balance sheets date, have been
paid or provided for in arriving at the
financial results for the year under
review.
By order of the Board.
Mrs. R. M. Hisham
Company Secretary
29 May 2014
Directors’ statement on internal controls
Responsibility
The Board of Directors presents this
report on internal control as per
requirements of Code of Best Practice
on Corporate Governance issued by
the Institute of Chartered Accountants
of Sri Lanka and Securities and
Exchange Commission of Sri Lanka.
The Board of Directors (“Board”) is
responsible for the adequacy and
effectiveness of the United Motors
Lanka PLC’s (“the Company”) system
of internal controls. However ,such
a system is designed to manage the
Company’s key areas of risk within an
acceptable risk profile , rather than to
eliminate the risk of failure to achieve
the business objectives and policies of
the Company. Accordingly, the system
of internal controls can only provide a
reasonable but not absolute assurance
against material misstatement of
management and financial information
and records or against financial losses
or fraud.
The Board has established an on-going
process for identifying, evaluating and
managing the significant risks faced
by the Company and this process
includes enhancing the system of
internal controls as and when there
are changes to business environment
or regulatory guidelines.
The management assists the Board
in the implementation of the Board’s
policies and procedures on risks and
control by identifying and assessing
the risks faced, by the Company,
and designing, implementing and
monitoring of suitable internal
controls to mitigate and control these
risks.
The Board is of the view that the
system of internal controls in place
is sound and adequate to provide
a reasonable assurance regarding
the reliability of financial reporting,
and that the preparation of financial
statements for external purposes
is in accordance with relevant
accounting principles and regulatory
requirements.
Key internal control processes
adopted in applying and
reviewing the design and
effectiveness of the internal
control system on financial
reporting
The key processes that have been
established in reviewing the adequacy
and integrity of the system of internal
controls with respect to financial
reporting include the following:
The Internal Audit Division
of the Company checks for
compliance with policies and
procedures and the effectiveness
of the internal control systems
and highlights significant
findings in respect of any noncompliance. Audits are carried
out on all business process at
Head Office and branches in
accordance with the annual
audit plan approved by the Audit
Committee. The frequency of
which is determined by the level
of risk assessed by the internal
audit, to provide an independent
and objective report on
operational and management
activities of these business
processes at Head Office and
branches. The findings of the
internal audits are submitted to
the Audit Committee for review
at their periodic meetings.
The Audit Committee reviews
internal control issues identified
by the Internal Audit Division,
the external auditors and
management , and evaluates
the adequacy and effectiveness
of the risk management and
internal control systems.
They also review the internal
audit functions with particular
emphasis on the scope of
audits. Further details of
the activities undertaken by
the Audit Committee of the
Company are set out in the Audit
Committee Report on page 91.
In assessing the internal control
system, the divisional heads of the
Company collated all procedures and
controls. These in turn were observed
and checked by the Internal Audit
Division for suitability of design and
effectiveness on an on-going basis.
The assessment included subsidiaries
as well.
Since the adoption of new Sri Lanka
Accounting Standards comprising
LKAS and SLFRS in 2013, processes
that are required to comply with
new requirements of recognition,
measurement, presentation and
disclosures were introduced and
implemented in 2013.Continuous
monitoring is in progress to ensure
effective implementation of the
required processes.
The recommendations made by the
external auditors in connection with
the internal control system in previous
years were reviewed during the year
and appropriate steps have been taken
to implement them.
Confirmation
Based on the above processes, the
Board confirms that the financial
reporting system of the Company has
been designed to provide a reasonable
assurance regarding the reliability
of financial reporting and the
preparation of financial statements
for external purposes has been
done in accordance with Sri Lanka
Accounting Standards and regulatory
requirements.
By order of the Board
Mrs. A. H. Fernando
Chairperson - Audit Committee
Mr. C. Yatawara
Chief Executive Officer/Executive
Director
Mr. Sunil G. Wijesinha
Chairman
29 May 2014
United Motors Lanka PLC | Annual Report 2013/14 105
CEO and CFO’s responsibility statement
The financial statements of United
Motors Lanka PLC and the group are
prepared in compliance with the Sri
Lanka Accounting Standards issued by
the Institute of Chartered Accountants
of Sri Lanka, the requirements of the
Companies Act No. 07 of 2007, the
Sri Lanka Accounting and Auditing
Standards Act No. 15 of 1995 and
the listing rules of the Colombo Stock
Exchange applicable to the company.
The accounting policies used in
the preparation of the financial
statements are appropriate and
are consistently applied, except
where otherwise stated in the
notes accompanying the financial
statements. There have been no
changes in the accounting policies
adopted by the company during the
year under review.
The significant accounting policies
adopted in the preparation of the
financial statements of the group and
the company are given on pages 112
to 122 of the annual report.
We confirm, that to the best of our
knowledge, the financial statements
and other financial information
included in this annual report, fairly
present in all material aspects,
the financial position, results of
operations and cash flows of the
company and the group as of and for
the periods presented in this annual
report. There are no departures from
the prescribed accounting standards
in their adoption.
The Board of Directors and the
management of your company
accepts responsibility for the integrity
and objectivity of these financial
statements. The estimates and
judgments relating to the financial
statements were made on a prudent
and reasonable basis, in order that the
financial statements reflect a true and
fair manner, the form and substance
of transactions and reasonably
present the company’s state of affairs.
We are responsible for establishing
and maintaining internal controls and
procedures and have designed such
controls and procedures, or caused
such controls and procedures to be
designed under our supervision, to
ensure that material information
relating to the company is made
known to us and for safeguarding
the company’s assets and preventing
and detecting fraud and error. We
have evaluated the effectiveness of
the company’s internal controls and
procedures and are satisfied that the
controls and procedures were effective
as of the end of the period covered
by this annual report. We confirm,
based on our evaluations that there
were no significant deficiencies and
material weaknesses in the design
or operation of internal controls. No
fraud that involved management or
other employees was reported in the
year under review.
It is also declared and confirmed
that the company has complied with
and ensured compliance with the
guidelines for the Listed Companies
where mandatory compliance is
required. It is further confirmed that
all the other guidelines have been
complied with and that there are no
known material litigations and claims
against the company other than those
arising out of the normal course of
business.
Our internal audit division has
conducted periodic audits to provide
reasonable assurance that the
established policies and procedures
of the company were consistently
followed. However, there are inherent
limitations that should be recognized
in weighing the assurances provided
by any system of internal controls and
accounting.
A.C.M. Lafir
Executive Director – Finance
The financial statements were audited
by KPMG, Chartered Accountants, the
independent auditors.
The Audit Committee of your
Company meets periodically with the
internal auditors and the independent
auditors to review the manner in
which the auditors are performing
their responsibilities, and to discuss
auditing, internal control and financial
reporting issues. To ensure complete
independence, the independent
auditors and the internal auditors have
full and free access to the members
of the audit committee to discuss any
matter of substance.
106 United Motors Lanka PLC | Annual Report 2013/14
C. Yatawara
Chief Executive Officer/Executive
Director
29th May 2014
Independent auditor’s report
TO THE SHAREHOLDERS OF
UNITED MOTORS LANKA PLC
Report on the Financial
Statements
We have audited the accompanying
financial statements of United Motors
Lanka PLC (“the Company”) and the
consolidated financial statements
of the Company and its subsidiaries
(“the Group”), which comprise the
statement of financial position as
at March 31, 2014, the statements
of comprehensive income, changes
in equity and cash flows for the year
then ended, and notes, comprising a
summary of significant accounting
policies and other explanatory
information set out on pages 112 to
160 of the annual report.
Management’s Responsibility for
the Financial Statements
Management is responsible for the
preparation and fair presentation
of these financial statements in
accordance with Sri Lanka Accounting
Standards. This responsibility
includes: designing, implementing
and maintaining internal control
relevant to the preparation and
fair presentation of financial
statements that are free from material
misstatement, whether due to fraud
or error; selecting and applying
appropriate accounting policies; and
making accounting estimates that are
reasonable in the circumstances.
Scope of Audit and Basis of
Opinion
Our responsibility is to express an
opinion on these financial statements
based on our audit. We conducted our
audit in accordance with Sri Lanka
Auditing Standards. Those standards
require that we plan and perform the
audit to obtain reasonable assurance
whether the financial statements are
free from material misstatement.
An audit includes examining, on
a test basis, evidence supporting
the amounts and disclosures in the
financial statements. An audit also
includes assessing the accounting
policies used and significant estimates
made by management, as well
as evaluating the overall financial
statement presentation.
We have obtained all the information
and explanations which to the best
of our knowledge and belief were
necessary for the purposes of our
audit. We therefore believe that our
audit provides a reasonable basis for
our opinion.
position of the Company as at
March 31, 2014, and of its financial
performance and its cash flow for the
year then ended in accordance with
Sri Lanka Accounting Standards.
In our opinion, the consolidated
financial statements give a true and
fair view of the financial position of
the Company and its subsidiaries
dealt with thereby as at March 31,
2014, and of its financial performance
and its cash flows for the year then
ended in accordance with Sri Lanka
Accounting Standards.
Report on Other Legal and
Regulatory Requirements
These financial statements also
comply with the requirements of
Sections 153(2) to 153(7) of the
Companies Act No. 07 of 2007.
Chartered Accountants
Colombo
May 29, 2014
Opinion
In our opinion, so far as appears
from our examination, the Company
maintained proper accounting records
for the year ended March 31, 2014,
and the financial statements give a
true and fair view of the financial
United Motors Lanka PLC | Annual Report 2013/14 107
Statements of comprehensive income
Group
For the year ended 31 March
Note
Revenue
Cost of sales
Gross profit
Other income
Distribution expenses
Administrative expenses
Other expenses
Profit from operations
Finance income
Finance cost
Net finance income
Profit before income tax expenses
Income tax expense
Profit for the year
Other comprehensive income
Net change in fair value of available
for sale financial assets
Employee benefit plan actuarial losses
Total other comprehensive income /
(loss) for the year
Total comprehensive income for the year
9
10
11
12
13.1
13.1
14
13.2
30.6
2014
Rs.’000
Company
2013
Rs.’000
2014
Rs.’000
2013
Rs.’000
13,890,397
(10,086,758)
3,803,639
53,006
(409,030)
(1,385,595)
(54,146)
2,007,874
300,441
(128,044)
172,397
2,180,271
(574,983)
1,605,288
17,776,580
(13,512,553)
4,264,027
86,380
(388,659)
(1,221,686)
(42,239)
2,697,823
127,058
(111,842)
15,216
2,713,039
(705,596)
2,007,443
7,041,192
(4,165,645)
2,875,547
42,261
(161,992)
(1,082,925)
(29,757)
1,643,134
380,366
(39,442)
340,924
1,984,058
(501,293)
1,482,765
8,774,242
(5,669,775)
3,104,467
80,581
(182,764)
(890,779)
(38,498)
2,073,007
388,738
(18,700)
370,038
2,443,045
(556,283)
1,886,762
(2,686)
(3,739)
156,901
(14,613)
(2,686)
(8,385)
156,901
(12,767)
(6,425)
1,598,863
142,288
2,149,731
(11,071)
1,471,694
144,134
2,030,896
Profit attributable to:
Equity holders of the company
Non controlling interest
Profit for the year
1,607,721
(2,433)
1,605,288
2,012,914
(5,471)
2,007,443
1,482,765
1,482,765
1,886,762
1,886,762
Total comprehensive income attributable to:
Equity holders of the company
Non controlling interest
Total comprehensive income for the year
1,601,021
(2,158)
1,598,863
2,155,160
(5,429)
2,149,731
1,471,694
1,471,694
2,030,896
2,030,896
Earnings per share (Rs)
15
23.90
29.92
22.04
28.05
Dividend per share (Rs)
16
13.00
9.00
13.00
9.00
Notes from pages 112 to 160 form an integral part of these financial statements.
Figures in brackets indicate deductions.
108 United Motors Lanka PLC | Annual Report 2013/14
Statements of financial position
Group
As at 31 March
2013
Rs.’000
2014
Rs.’000
2,947,358
59,964
22,489
762,806
112,162
64,879
3,969,658
2,211,284
59,964
26,252
1,212,552
100,025
61,500
3,671,577
2,536,725
151,378
4,023
173,400
173,545
762,806
107,054
42,034
3,950,965
1,839,745
151,891
6,909
173,400
173,545
1,212,552
96,757
35,748
3,690,547
23
24
25
34
22
26
4,047,163
1,880,664
19,694
5,403
703,552
238,629
6,895,105
10,864,763
3,422,041
1,616,911
21,188
1,373,403
6,433,543
10,105,120
2,140,453
951,562
24,868
503,552
162,290
3,782,725
7,733,690
1,535,959
693,859
41,566
1,224,825
3,496,209
7,186,756
27
28
336,335
1,223,276
1,691,496
4,846,070
336,335
1,223,276
1,694,182
4,116,834
336,335
1,189,230
1,691,496
3,430,473
336,335
1,189,230
1,694,182
2,830,564
8,097,177
2,722
8,099,899
7,370,627
4,880
7,375,507
6,647,534
6,647,534
6,050,311
6,050,311
11,367
170,702
36,137
218,206
19,047
149,099
25,856
194,002
150,121
16,488
166,609
127,669
7,405
135,074
1,154,225
1,075,265
124,919
192,249
2,546,658
2,764,864
10,864,763
933,802
1,060,996
389,377
151,436
2,535,611
2,729,613
10,105,120
100,100
443,083
117,820
117,143
141,401
919,547
1,086,156
7,733,690
514,068
50,615
345,819
90,869
1,001,371
1,136,445
7,186,756
120.37
109.57
98.82
Note
Assets
Non-current assets
Property, plant and equipment
Investment property
Intangible assets
Investments in subsidiaries
Investments in joint venture
Other investments
Defined benefit plan
Deferred tax assets
Total non current assets
Current assets
Inventories
Trade and other receivables
Amounts due from related parties
Current tax receivables
Other investments
Cash and cash equivalents
Total current assets
Total assets
Equity and liabilities
Equity
Stated capital
Capital reserves
Revenue reserves
Retained earnings
Total equity attributable to the equity
holders of the company
Non controlling interest
Total equity
Non-current liabilities
Interest bearing borrowings
Employee benefits
Deferred tax liabilities
Total non-current liabilities
Current liabilities
Interest bearing borrowings
Trade and other payables
Amounts due to related parties
Current tax liabilities
Bank overdrafts
Total current liabilities
Total liabilities
Total equity and liabilities
Company
2014
Rs.’000
17
18
19
20
21
22
30.2
31.1
29
30.1
31.2
29
32
33
34
26
Net assets per share (Rs)
2013
Rs.’000
89.94
Notes from pages 112 to 160 form an integral part of these financial statements.
I certify that these financial statements are in compliance with the requirements of Companies Act No. 07 of 2007.
A. C. M. Lafir
Executive Director - Finance
The Board of Directors is responsible for the preparation and presentation of these financial statements. Theses financial statements were approved by
the Board of Directors on 29 May 2014.
Approved and signed for and on behalf of the Board of Directors.
Sunil G. Wijesinha
Chairman
Colombo
29 May 2014
C. Yatawara
CEO / Executive Director
United Motors Lanka PLC | Annual Report 2013/14 109
Statements of changes in equity
Attributable to equity holders of parent
Stated Revaluation
capital
reserve
Group
Balance as at 01.04.2012
Total comprehensive income for the year
Profit for the year
Adjustment to building (note 17.1)
Other comprehensive income
Total comprehensive income for the year
Transactions with owners, recognised
directly in equity
Distribution to owners of the company
Final dividend paid - 2011 / 12
Interim dividend paid - 2012 / 13
Balance as at 31.03.2013
Total comprehensive income for the year
Profit for the year
Other comprehensive income
Total comprehensive income for the year
Rs.’000
Rs.’000
336,335
1,218,974
Development
reserve
Property,
plant &
equipment
replacement
reserve
Rs.’000
Rs.’000
785,400
308,900
General
reserves
Available
for sale
reserve
Retained
earnings
Total
Non
controlling
interest
Total
equity
Rs.’000
Rs.’000
Rs.’000
Rs.’000
Rs.’000
Rs.’000
466,250
(23,269) 2,723,979 5,816,569
10,900 5,827,469
2,012,914 2,012,914
4,302
156,901
(14,655) 142,246
156,901 1,998,259 2,159,462
(5,471) 2,007,443
4,302
42
142,288
(5,429) 2,154,033
4,302
-
4,302
-
-
-
336,335
1,223,276
785,400
308,900
466,250
(403,603) (403,603)
(201,801) (201,801)
133,632 4,116,834 7,370,627
(591) (404,194)
- (201,801)
4,880 7,375,507
-
1,607,721 1,607,721
(2,686)
(4,014)
(6,700)
(2,686) 1,603,707 1,601,021
(2,433) 1,605,288
275
(6,425)
(2,158) 1,598,863
(201,801)
(269,068)
- (201,801)
(201,801)
2,722 8,099,899
-
-
-
-
Transactions with owners, recognised
directly in equity
Distribution to owners of the company
Second interim dividend paid 2012 / 2013
Final dividend paid 2012 / 2013
First interim dividend paid 2013 / 2014
Second interim dividend paid 2013 / 2014
Balance as at 31.03.2014
336,335
1,223,276
785,400
308,900
466,250
(201,801) (201,801)
(269,068) (269,068)
(201,801) (201,801)
(201,801) (201,801)
130,946 4,846,070 8,097,177
Company
Balance as at 01.04.2012
336,335
1,184,928
785,400
308,900
466,250
(23,269) 1,561,973 4,620,517
- 4,620,517
-
4,302
4,302
-
1,886,762 1,886,762
4,302
156,901
(12,767) 144,134
156,901 1,873,995 2,035,198
1,886,762
4,302
144,134
- 2,035,198
466,250
(403,603) (403,603)
(201,801) (201,801)
133,632 2,830,564 6,050,311
- (403,603)
- (201,801)
- 6,050,311
-
1,482,765 1,482,765
(2,686)
(8,385)
(11,071)
(2,686) 1,474,380 1,471,694
1,482,765
(11,071)
- 1,471,694
466,250
(201,801) (201,801)
(269,068) (269,068)
(201,801) (201,801)
(201,801) (201,801)
130,946 3,430,473 6,647,534
(201,801)
(269,068)
(201,801)
(201,801)
- 6,647,534
Total comprehensive income for the year
Profit for the year
Adjustment to investment property (note 18)
Other comprehensive income
Total comprehensive income for the year
Transactions with owners, recognised
directly in equity
Distribution to owners of the company
Final dividend paid - 2011/12
Interim dividend paid - 2012/13
Balance as at 31.03.2013
Total comprehensive income for the year
Profit for the year
Other comprehensive income
Total comprehensive income for the year
Transactions with owners, recognised
directly in equity
Distribution to owners of the company
Second interim dividend paid 2012 / 2013
Final dividend paid 2012 / 2013
First interim dividend paid 2013 / 2014
Second interim dividend paid 2013 / 2014
Balance as at 31.03.2014
336,335
-
336,335
1,189,230
-
785,400
-
1,189,230
-
785,400
-
308,900
-
308,900
In accordance with LKAS 10 “Events after the reporting period” proposed dividend is not recognised as a separate item under equity and such dividend has been disclosed in note 40.
Revaluation reserve on property, plant & equipment represents the unutilised revaluation surplus arising out of the revaluation of lands of United Motors Lanka PLC and TVS
Lanka (Pvt) Ltd, a joint venture of the group.
Property, plant & equipment replacement reserve represents profits reserved by the company for the replacement of capital assets that have either completed their economic
life or whose technologies are out-dated and thus require replacement.
Development reserve represents profits that have been held in reserve to fund future development projects of the company.
General reserves are profits held in the reserve to fund future needs of the business which have not been specified.
Available for sale reserve comprises the cumulative net change in the fair value of available for sale financial assets until the investments are derecognised or impaired.
Notes from page 112 to 160 form an integral part of these financial statements.
Figures in the brackets indicate deduction.
110 United Motors Lanka PLC | Annual Report 2013/14
Statements of cash flows
Group
For the year ended 31 March
Cash flows from operating activities
Profit before income tax expense
Adjustments for;
Provision for depreciation / amortisation
Profit on disposal of property, plant & equipment
Profit on sale of shares
Interest expense
Interest income
Dividend income
Impairment of trade receivables
Provision for employee benefit obligations
Expected return on plan asset
Provision for slow moving / obsolete inventories
Fair value adjustment on unit trust
Operating profit before working capital changes
(Increase) / decrease in inventories
(Increase) / decrease in trade and other receivables
Decrease / (Increase) in amounts due from related
party receivables
Increase / (decrease) in amounts due to related
party payables
Increase / (decrease) in trade and other payables
Cash generated from operations
Interest paid
Income tax paid
Contribution paid and received from
investment plan (net)
Net cash generated from operating activities
Cash flows from investing activities
Acquisition of other investments
Proceeds from disposal of shares
Acquisitions of property, plant & equipment and
intangible assets
Proceeds from disposal of property, plant & equipment
Investment in other long term assets - employee benefits
Interest received
Dividend received
Net cash used in investing activities
Cash flows from financing activities
Dividend paid
Dividend paid to non controlling interest
Lease rentals paid
Loans obtained
Loans paid
Net cash used in financing activities
Net (decrease) / increase in cash & cash equivalents
Cash & cash equivalents at beginning of year
Cash and cash equivalents at end of year (note 26)
Company
2014
Rs.’000
2013
Rs.’000
2014
Rs.’000
2013
Rs.’000
2,180,271
2,713,039
1,984,058
2,443,045
133,767
(16,227)
(74,484)
104,968
(128,863)
(52,544)
14,027
31,122
(10,230)
35,621
(3,552)
2,213,876
93,196
(14,685)
(4,894)
111,842
(44,664)
(21,955)
13,609
26,989
28,630
(3,053)
2,898,054
59,322
(13,630)
(74,484)
16,668
(137,568)
(139,705)
882
24,627
(10,025)
28,875
(3,552)
1,735,468
37,595
(11,596)
(4,894)
18,700
(45,163)
(310,450)
8,320
20,459
30,178
(3,053)
2,183,141
(660,743)
(277,780)
961,396
1,254,518
(633,369)
(258,585)
1,151,390
973,495
1,494
14,269
1,291,116
13,404
16,698
(25,920)
(981,058)
4,146,314
67,205
(70,984)
856,433
(86,437)
(171,403)
4,024,266
(104,968)
(837,942)
(111,842)
(1,077,099)
(16,668)
(727,172)
(18,700)
(613,767)
(2,866)
345,340
(1,667)
2,955,706
112,593
(479,516)
301,057
(714,453)
33,505
(279,516)
301,057
(714,453)
33,505
(872,920)
23,071
(12,299)
128,863
52,544
(859,200)
(224,820)
15,935
(16,229)
44,664
21,955
(839,443)
(753,442)
14,171
(10,832)
137,568
139,705
(451,289)
(156,839)
12,021
(12,961)
45,163
310,450
(483,114)
(874,471)
(9,859)
11,719,150
(11,496,547)
(661,727)
(1,175,587)
1,221,967
46,380
(605,404)
(591)
(10,276)
6,894,892
(7,503,073)
(1,224,452)
891,811
330,156
1,221,967
(874,471)
4,121,988
(4,021,888)
(774,371)
(1,113,067)
1,133,956
20,889
(605,404)
2,581,312
(3,901,943)
(1,926,035)
982,762
151,194
1,133,956
112
3,391,911
Notes from page 112 to 160 form an integral part of these financial statements.
Figures in the brackets indicate deduction.
United Motors Lanka PLC | Annual Report 2013/14 111
Notes to the financial statements
1.
Reporting entity
United Motors Lanka PLC (the
“Company”), is a public quoted
company incorporated on 9 May
1989 and domiciled in Sri Lanka. The
registered office and the principal
place of business of the company
are located at No. 100, Hyde Park
Corner, Colombo 02. The consolidated
financial statements of the group as
at and for the year ended 31 March
Name of company
United Motors Lanka PLC
Subsidiaries
Unimo Enterprises Ltd
Orient Motor Company Ltd
UML Property Development Ltd
Jointly controlled entities
TVS Lanka (Pvt) Ltd
TVS Auto Parts (Pvt) Ltd
TVS Automotives (Pvt) Ltd
2.
2014 comprise the company and its
subsidiaries (together referred to as
the “Group” and individually as “Group
Entities”) and the group’s interests in
jointly controlled entities. All the group
entities and joint ventures are limited
liability companies, incorporated and
domiciled in Sri Lanka. The principal
activities of the company, subsidiaries
and jointly controlled entities are given
below.
Principal activities
Importation & distribution of brand new
Mitsubishi & Fuso vehicles, spare parts,
lubricants, after sales services and related
services.
Importation & distribution of vehicles & tyres
and assembling of vehicles
Importation & distribution and hiring of
vehicles
Renting of premises
Importation & distribution of motor bikes,
three wheelers, spare parts & related
services
Importation & distribution of spare parts
Importation & distribution of lubricants &
tyres
Basis of preparation
2.1 Statement of compliance
The consolidated financial statements
have been prepared in accordance
with the Sri Lanka Financial Reporting
Standards (SLFRS) and Sri Lanka
Accounting Standards (LKAS) laid
down by the Institute of Chartered
Accountants of Sri Lanka (CA Sri
Lanka) and the requirements of the
Companies Act No. 07 of 2007.
The financial statements were
approved by the Board of Directors on
29 May 2014.
material items in the statement of
financial position:
Financial instruments at fair
value through profit or loss are
measured at fair value.
Available for sale financial assets
are measured at fair value.
Defined benefit obligation is
measured after actuarially
valuing and the present value of
the defined benefit obligation is
recorded. Defined benefit assets
is measured at fair value.
Land stated at valuation.
2.3
2.2 Basis of measurement
The consolidated financial statements
have been prepared on an accrual
basis except for cash flow information
and under the historical cost
convention except for following
Functional and presentation
currency
The financial statements of the
company and the group are presented
in Sri Lankan Rupees, which is the
company’s functional currency. All
financial information presented in
112 United Motors Lanka PLC | Annual Report 2013/14
Sri Lankan Rupees has been rounded
to the nearest thousand.
2.4
Use of estimates and
judgments
The preparation of financial
statements in conformity with
SLFRS/LKAS requires management
to make judgments, estimates
and assumptions that affect the
application of accounting policies
and the reported amounts of assets,
liabilities, income and expenses.
Actual results may differ from these
estimates.
Estimates and underlying assumptions
are reviewed on an ongoing basis.
Revisions to accounting estimates are
recognized in the period in which the
estimates are revised and in any future
period affected.
Information about significant areas
of estimates, uncertainty and critical
judgments in applying accounting
policies that have the most significant
effects on the amounts recognised
in these financial statements are
included in the following notes.
Note 17
Note 24
Note 30
Note 31
Note 37
3.
- Provision for depreciation
- Impairment of trade
receivables
- Employee benefit
obligations
- Deferred tax liabilities/
assets
- Contingent liabilities
Significant accounting
policies
The accounting policies set out
below have been applied consistently
to all periods presented in these
consolidated financial statements
and have been applied consistently by
group entities.
3.1
Basis of consolidation
The group’s financial statements
comprise consolidated financial
statements of the company, its
subsidiaries in terms of LKAS - 27 on
Consolidated and Separate Financial
Statements and proportionate
consolidation for jointly controlled
entities in terms of LKAS 31 Interests in Joint Ventures. All intra
group balances, income and expenses
and profits and losses resulting
from intra group transactions are
eliminated in full.
3.1.1 Acquisitions and divestments
Acquisitions of subsidiaries are
accounted for using the purchase
method of accounting. The results
of subsidiaries and joint ventures
have been included from the date of
acquisition, or incorporation while
results of subsidiaries and joint
ventures disposed will be included up
to the date of disposal.
3.1.2 Subsidiaries
Subsidiaries are those entities
controlled by the group. Control
exists when the group has the power
directly or indirectly to govern the
financial and operating policies of an
entity so as to obtain benefits from
its activities. In assessing control,
potential voting rights that are
currently exercisable or convertible are
taken into account.
Investments in subsidiaries are treated
as long-term investments and are
valued at cost less any impairment
losses in the parent company’s
financial statements in accordance
with the LKAS 27 - Consolidated and
Separate Financial Statements.
The financial statements of
subsidiaries are included in the
consolidated financial statements
from the date that control commences
until the date that control ceases.
These consolidated financial
statements are prepared to a common
financial year end of 31 March. The
accounting policies of subsidiaries are
in line with the policies adopted by the
company. All the assets and liabilities
of the company and the subsidiaries
are included in the consolidated
statement of financial position.
3.1.3 Non-controlling interests
Non-controlling interests represent
the portion of profit or loss and
net assets of subsidiaries/jointly
controlled entities not owned directly
or indirectly by the company.
The proportionate interest of
minority shareholders in the net
assets employed by the group is
disclosed separately within the equity
in the consolidated statement of
financial position as “Non-Controlling
Interests”. The total profits and
losses for the year of the company,
its subsidiaries and joint venture
are disclosed in the consolidated
statement of comprehensive income
and the allocation of profit and loss
for the period attributable to minority
and equity holders are disclosed
separately.
3.1.4 Goodwill
Goodwill arising on an acquisition
represents the excess of the cost
of acquisition over the fair value of
the net assets acquired. SLFRS 3
on Business Combinations requires
that following the initial recognition,
goodwill is to be measured at cost
less any accumulated impairment
losses. Goodwill to be reviewed
for impairment annually or more
frequently if events or changes in
circumstances indicate that the
carrying value may be impaired.
As part of its transition to Sri Lanka
Financial Reporting Standards
the group elected to restate only
those business combinations that
occurred on or after 1 April 2010.
In respect of acquisitions prior to 1
April 2010, goodwill represents the
amount recognized under group’s
previous accounting framework.
However company has not acquired
any subsidiary after 1 January
2010. Hence the current goodwill in
the statement of financial position
represents the amounts recognized
based on the previous accounting
standards.
3.1.5 Jointly controlled entities
Jointly controlled entity controls the
assets of the joint venture, incurs
liabilities and expenses and earns
income. Jointly controlled entities
are consolidated using proportionate
consolidation method. Venture’s
share of each of the asset, liabilities,
income and expenses of a jointly
controlled entity is combined line by
line with similar items in the venture’s
financial statement.
Investment in jointly controlled entity
is treated as long-term investment and
are valued at cost less any impairment
losses in the parent company’s
financial statements in accordance
with the LKAS 31 - Interests in Joint
Venture.
3.1.6 Loss of control
Upon the loss of control, the group
derecognises the assets and liabilities
of the subsidiary, any non-controlling
interests and the other components of
equity related to the subsidiary. Any
surplus or deficit arising on the loss of
control is recognized in profit or loss.
If the group retains any interest in the
previous subsidiary, then such interest
is measured at fair value at the date
of control is lost. Subsequently it is
accounted for as an equity accounted
investee or in accordance with the
group’s accounting policy for financial
instruments depending on the level of
influence retained.
3.1.7 Transactions eliminated on
consolidation
Intra-group balances and transactions,
and any unrealized income and
expenses arising from intra-group
transactions, are eliminated in
preparing consolidated financial
Statements. Unrealized gains
arising from transactions with equity
accounted investees are eliminated
to the extent of the group’s interest
United Motors Lanka PLC | Annual Report 2013/14 113
Notes to the financial statements contd.
in the investee. Unrealized losses
are eliminated in the same way as
unrealized gains but only to the
extent that there is no evidence of
impairment.
3.2 Foreign currency transactions
Transactions in foreign currencies are
translated to Sri Lanka Rupees at the
foreign exchange rate prevailing at the
dates of the transactions. Monetary
assets and liabilities denominated
in foreign currencies are translated
to Sri Lanka Rupees at the foreign
exchange rate prevailing as at the
reporting date. Non-monetary assets
and liabilities which are stated at
historical cost denominated in foreign
currencies are translated to Sri Lanka
Rupees at the exchange rate prevailing
at the dates of the transactions. Nonmonetary assets & liabilities that are
stated at fair value denominated in
foreign currencies are translated to
Sri Lanka Rupees at the exchange rate
prevailing at the dates that the values
were determined. Foreign exchange
differences arising on translation
are recognised in the statement of
comprehensive income.
3.3 Financial instruments
3.3.1 Non derivative financial assets
3.3.1.1 Initial recognition and
measurement
Financial Assets are recognized when
and only when the company becomes
a party to the contractual provisions
of the financial instruments. The
company determines the classification
of its financial assets at initial
recognition. When financial assets
are recognized they are measured at
fair value plus directly attributable
transaction costs, however in the case
of financial assets classified at fair
value through profit or loss, directly
attributable transaction costs are not
considered.
The financial assets include cash and
cash equivalent, short term deposits,
investments in commercial paper, unit
trusts, treasury bills, equity shares
and trade and other receivables.
3.3.1.2 Classification and Subsequent
Measurement
At inception a financial asset is
classified into one of the following
categories;
At fair value through profit or
loss.
Loans and receivables.
Available-for-sale
Held to maturity investments
The subsequent measurement of
financial assets depends on their
classification as follows;
Financial assets at fair value through
profit or loss
Financial asset at fair value through
profit or loss include financial assets
held for trading and financial assets
designated upon initial recognition
at fair value through profit or loss.
Financial assets are classified as held
for trading if they are acquired for the
purpose of selling or repurchasing in
the near term. Financial assets at fair
value through profit or loss are carried
in the statement of financial position
at fair value with changes in fair
value recognized in finance income
or finance costs in the statement of
comprehensive income.
Investments in unit trust are classified
as financial assets at fair value
through profit or loss.
Loans & receivables
Loans and receivables are financial
assets with fixed or determinable
payments that are not quoted in
an active market. Such assets are
recognized initially at fair value plus
any directly attributable transaction
costs. Subsequent to initial
recognition loans and receivables
are measured at amortized cost
using the effective interest method
(EIR), less any impairment losses.
The losses arising from impairment
are recognized in the statement of
comprehensive income in impairment
losses on loans and receivables.
114 United Motors Lanka PLC | Annual Report 2013/14
Loans and receivables comprises of
cash and cash equivalents, trade and
other receivables and receivables from
related companies.
Available for sale financial assets
Available for sale financial assets are
non-derivative financial assets that
are designated as available for sale.
According to LKAS 39 investment
in long term equity securities are
classified as available for sale financial
assets. Available for sale financial
assets are recognized at fair value,
subsequently measured at fair value,
with changes recognized in other
comprehensive income (OCI) and
presented within equity in the fair
value reserve. If there is significant
and prolong decline in fair value, such
decline is identified as impairment.
Impairment losses shall be recognized
in the profit or loss and cumulative
losses recognized in the OCI will be
recycled to profit or loss.
Available for sale financial assets
comprises investments in equity
securities.
Held to maturity investments
Non-derivative financial assets with
fixed or determinable payments
and fixed maturities are classified
as held-to-maturity when the Group
has the positive intention and
ability to hold them to maturity.
After initial measurement, held-tomaturity investments are measured
at amortised cost using the effective
interest method, less impairment.
Amortised cost is calculated by
taking into account any discount or
premium on acquisition and fees
or costs that are an integral part
of the EIR. The EIR amortization is
included in finance income in the
statement of comprehensive income.
The losses arising from impairment
are recognised in the statement of
comprehensive income under finance
costs.
There were no assets classified as held
to maturity as at the reporting date.
3.3.1.3 Derecognition
The company and group derecognise
a financial asset when the contractual
rights to the cash flows from the asset
expire, or it transfers the rights to
receive the contractual cash flows on
the financial asset in a transaction in
which substantially all the risks and
rewards of ownership of the financial
asset are transferred. Any interest
in transferred financial assets that
is created or retained by the group
is recognized as a separate asset or
liability.
3.3.1.4 Impairment of financial asset
A financial asset not carried at
fair value through profit or loss is
assessed at each reporting date to
determine whether there is objective
evidence that it is impaired. A
financial asset is impaired if objective
evidence indicates that a loss
event has occurred after the initial
recognition of the asset, and that the
loss event had a negative effect on the
estimated future cash flows of that
asset that can be estimated reliably.
Impairment of financial assets carried at
amortised cost.
The group considers evidence of
impairment for receivables at both
specific asset and collective level. All
individually significant receivables
are assessed for specific impairment.
Loans and receivables that are not
individually significant are collectively
assessed for impairment by grouping
together receivables with similar risk
characteristics.
In assessing collective impairment
the group uses historical trends of
the probability of default, the timing
of recoveries and the amount of loss
incurred, adjusted for management’s
judgments as to whether current
economic and credit conditions are
such that the actual losses are likely
to be greater or less than suggested
by historical trends.
Losses are recognized in profit or loss
and reflected in an allowance account
against loans and receivables. When
a subsequent event (e.g. repayment
by a debtor) causes the amount
of impairment loss to decrease,
the decrease in impairment loss is
reversed through profit or loss.
Impairment of financial assets - available
for sale
Impairment losses on available -for
-sale financial assets are recognized
by reclassifying accumulated losses
that has been recognized in other
comprehensive income and presented
in the fair value reserve in equity,
to profit or loss. If, in a subsequent
period, the fair value of an impaired
available for sale asset increases
and the increase can be related
objectively to an event occurring after
the impairment loss was recognised
in profit or loss, then the impairment
loss is reversed, with the amount
of the reversal recognised in profit
or loss. However, any subsequent
recovery in the fair value of an
impaired available for sale equity
security is recognised in other
comprehensive income.
3.3.2 Non derivative financial liabilities
3.3.2.1 Initial recognition and
measurement
Financial liabilities within the scope
of SLFRS/LKAS are recognized when
and only when the company becomes
a party to the contractual provisions
of the financial instrument. Financial
liabilities are recognized initially at fair
value plus transaction cost that are
directly attributable to the issue of the
financial liability, which are not at fair
value through profit or loss. Financial
liabilities can be classified in to two
categories as financial liabilities at
fair value through profit or loss and
other financial liabilities. Company has
classified its financial liabilities in to
other financial liability category.
3.3.2.2 Subsequent measurement
The group classifies non derivative
financial liability into the other
financial liabilities category. Such
financial liabilities are recognized
initially at fair value plus any directly
attributable transaction costs.
Subsequent to initial recognition,
these financial liabilities are measured
at amortized cost using the effective
interest method. Such financial
liabilities measured at amortized cost
includes trade and other payables,
interest bearing borrowings, amounts
due to related companies etc.
3.3.2.3 Derecognition
A financial liability is derecognised
when the obligation under the
liability is extinguished. When an
existing financial liability is replaced
by another from the same lender
on substantially different terms,
or the terms of an existing liability
are substantially modified, such an
exchange or modification is treated as
a derecognition of the original liability
and the recognition of a new liability,
and the difference in the respective
carrying amounts is recognized in the
statement of comprehensive income.
3.3.3 Offsetting of financial instruments
Financial assets and financial
liabilities are offset and the net
amount presented in the statement
of financial position when and only
when, the group has a legal right
to offset the amounts and intends
either to settle on a net basis or to
realize the asset and settle the liability
simultaneously.
3.4
Non financial assets and basis
of measurement
3.4.1 Property, plant and equipment
Property, plant and equipment
are tangible items that are held
for servicing, or for administrative
purposes and are expected to be used
during more than one period.
United Motors Lanka PLC | Annual Report 2013/14 115
Notes to the financial statements contd.
Basis of Recognition
Property, plant and equipment are
recognised if it is probable that future
economic benefits associated with the
assets will flow to the group and cost
of the asset can be reliably measured.
Measurement
An item of property, plant and
equipment that qualifies for
recognition as an asset is initially
measured at its cost. Cost includes
expenditure that is directly
attributable to the acquisition of the
asset and cost incurred subsequently
to add to, replace part of, or service
it. The cost of self-constructed assets
includes the cost of materials and
direct labour, any other costs directly
attributable to bringing the asset to a
working condition for their intended
use and the costs of dismantling and
removing the items and restoring
the site on which they are located.
Purchased software that is integral
to the functionality of the related
equipment is capitalised as part of
computer equipment.
Cost model
The group applies cost model to
property, plant and equipment except
for freehold land and records at cost
of purchase or construction together
with any incidental expenses thereon
less accumulated depreciation and
any accumulated impairment losses.
Revaluation model
The group applies the revaluation
model to the entire class of freehold
land. Such properties are carried at
a revalued amount, being their fair
value at the date of revaluation and
subsequent accumulated impairment
losses. Freehold land of the group is
revalued every five years to ensure
that the carrying amounts do not
differ materially from the fair values
at the reporting date. On revaluation
of an asset, any increase in the
carrying amount is recognized in
other comprehensive income and
accumulative in equity under the
heading of revaluation surplus or
used to reverse a previous revaluation
decrease relating to the same asset,
which was charged to the profit
or loss. In this circumstance, the
increase is recognised as income
to the extent of the previous write
down. Any decrease in the carrying
amount is recognized as an expense
in comprehensive income or is
recognized in other comprehensive
income to the extent of any credit
balance existing in the revaluation
reserve in respect of that asset. Any
balance remaining in the revaluation
reserve in respect of an asset is
transferred directly to Retained
Earnings on retirement or disposal of
the asset.
Subsequent costs
The cost of replacing part of an item
of property, plant and equipment is
recognised in the carrying amount
of the item if it is probable that the
future economic benefits embodied
within that part will flow to the group
and its cost can be measured reliably.
The costs of day-to-day servicing
of property, plant and equipment
are charged to the statement of
comprehensive income as incurred.
Derecognition
The carrying amount of an item of
property, plant and equipment is
derecognised on disposal or when no
future economic benefits are expected
from its use or disposal. The gain or
loss arising from the derecognition
of an item of property, plant and
equipment is included in statement of
comprehensive income when the item
is derecognised. When replacement
costs are recognised in the carrying
amount of an item of property,
plant and equipment, the remaining
carrying amount of the replaced part
is derecognised. Major inspection
costs are capitalised. At each such
capitalisation, the remaining carrying
amount of the previous cost is
derecognised.
116 United Motors Lanka PLC | Annual Report 2013/14
Depreciation
Depreciation is calculated over the
depreciable amount, which is the
cost of an asset or other amount
substituted for cost, less its residual
value. Depreciation is recognised
in the statement of comprehensive
income on straight-line basis over the
estimated useful lives of each item
of property, plant and equipment,
since this most closely reflects the
expected pattern of consumption
of the future economic benefits
embodied in the asset. Leased assets
are depreciated over the shorter of the
lease terms and useful lives unless it
is reasonably certain that the group
will obtain ownership by the end of
the lease period. Freehold land is not
depreciated.
The estimated useful lives for the
current and comparative periods are
as follows:
Buildings
Furniture and
fittings
Office equipment
Electrical fixtures
and fittings
Machinery and
tools
Motor vehicles
Reference books
Computers
10 years
5 years
4 years
4 years
4 – 10 years
4 years
10 years
5 years
UML Property Development Limited,
a BOI company, depreciated freehold
building at 2.5% per annum.
Depreciation methods, useful lives
and residual values are reviewed at
each reporting date. Depreciation of
an asset begins when it is available
for use, i.e. when it is in the location
and condition necessary for it to
be capable of operating in the
manner intended by management.
Depreciation of an asset ceases at the
earlier of the date that the asset is
classified as held for sale (or included
in a disposal group that is classified
as held for sale) and the date that the
asset is derecognised.
All classes of property, plant
and equipment together with the
reconciliation of carrying amounts
and accumulated depreciation at the
beginning and at the end of the year
are given in note 17.
Leasehold improvements are
capitalized and depreciated over the
life time of the lease or useful life
whichever is shorter.
Borrowing cost
As per LKAS 23 on “Borrowing costs”,
the group capitalizes borrowing
costs that are directly attributable
to the acquisition, construction or
production of a qualifying asset
as part of the cost of the asset. A
qualifying asset is an asset which
takes a substantial period of time to
get ready for its intended use or sale.
Other borrowing costs are recognized
in the profit and loss in the period it is
incurred.
Capital work-in-progress
Capital expenses incurred during the
year which are not completed as at the
reporting date are shown as capital
work-in-progress, whilst the capital
assets which have been completed
during the year and in use have
been transferred to property, plant &
equipment.
3.4.2 Investment properties
Investment properties are properties
held either to earn rental income or
for capital appreciation or both but
not for sale in the ordinary course
of business, used in the production
or supply of goods or services or for
administrative purposes.
Basis of recognition
Investment property is recognised if
it is probable that future economic
benefits that are associated with the
investment property will flow to the
group and cost of the investment
property can be reliably measured.
Below mentioned properties classified
as investment properties in the books
of United Motors Lanka PLC and UML
Property Development Limited do not
qualify as an investment property in
the consolidated financial statements.
The parent company, United
Motors Lanka PLC rented part
of the land and building to its
subsidiaries/affiliates.
The building held by UML
Property Development Limited
is rented to the parent company,
United Motors Lanka PLC.
Measurement
An investment property is measured
initially at its cost. The cost of a
purchased investment property
comprises its purchase price and any
directly attributable expenditure. The
cost of a self-constructed investment
property is its cost at the date when
the construction or development is
complete. The group applies the cost
model for investment properties in
accordance with LKAS 40 “Investment
Property”. Accordingly, land classified
as investment properties are stated
at cost less any accumulated
impairment losses and buildings
classified as investment properties are
stated at cost less any accumulated
depreciation and any accumulated
impairment losses.
Depreciation
Depreciation is provided on a straight
line basis over the estimated life of
the class of asset from the date of
purchase up to the date of disposal.
UML Property Development Limited
depreciated freehold building at 2.5%
per annum and United Motors Lanka
PLC depreciated freehold buildings at
10% per annum.
De recognition
Investment properties are
derecognised when disposed, or
permanently withdrawn from use
because no future economic benefits
are expected.
Reclassification of investment property
When the use of a property changes
from owner-occupied to investment
property, the transfers are recorded
at carrying amount following the cost
model as per LKAS 40.
3.4.3 Leased assets
Finance leases
Leases in terms of which the group
assumes substantially all the risks
and rewards of ownership are
classified as finance leases. Upon
initial recognition, the leased asset is
measured at an amount equal to the
lower of its fair value and the present
value of minimum lease payments.
Subsequent to initial recognition, the
asset is accounted for in accordance
with the accounting policy applicable
to that asset.
Operating leases
Other leases are operating leases.
Assets leased within the group are not
recognized in the group’s statement
of financial position.
3.4.4 Intangible assets
An intangible asset is an identifiable
non monetary asset without
physical substance held for use in
the production or supply of goods
or services, or for administrative
purpose.
Basis of recognition
Intangible assets are recognised if it
is probable that the future economic
benefits that are attributable to the
asset will flow to the entity and the
cost of the assets can be measured
reliably.
Goodwill
Goodwill represents the excess of the
cost of an acquisition over the fair
value of the group’s share of the net
identifiable assets of the acquired
subsidiary at the date of acquisition.
Goodwill is tested annually for
impairment and carried at cost less
accumulated impairment losses.
Impairment losses on goodwill are
United Motors Lanka PLC | Annual Report 2013/14 117
Notes to the financial statements contd.
not reversed. The negative goodwill
is recognized immediately in the
statement of comprehensive income.
Gains and losses on the disposal of an
entity include the carrying amount of
goodwill relating to the entity sold.
Software
All computer software costs incurred
licensed for use by the group, which
are not integrally related to associated
hardware, which can be clearly
identified, reliably measured and is
probable that they will lead to future
economic benefits, are included in the
statement of financial position under
the category intangible assets and
carried at cost less amortization and
any accumulated impairment losses.
Amortisation
Computer software are amortised
over their estimated useful economic
life over a period of 5 years on a
straight-line basis. They are assessed
for impairment whenever there is an
indication that the intangible asset
may be impaired.
Retirement and disposal
An intangible asset is derecognised on
disposal or when no future economic
benefits are expected from its use and
subsequent disposal.
3.4.5 Inventories
Inventories are measured at the lower
of cost and net realizable value.
The cost of inventories that are not
interchangeable are recognized by
using specific identification of their
individual cost and other inventories
are based on weighted average cost
formula. The cost of inventories
includes expenditure incurred in
acquiring the inventories and other
costs incurred in bringing them to
their existing location and condition.
Net realizable value is the estimated
selling price in the ordinary course
of business less the estimated
costs necessary to make the sale.
Accordingly, the costs of inventories
are accounted as follows:
Motor vehicles
Goods-in-transit
Work-in-progress
Other stocks
-
at actual cost
at actual cost
at cost of spares
at purchase cost
on a first in first
out basis
Provisions are made for all non-moving
and obsolete items on inventory
to reflect the lower of cost or net
realizable value.
3.4.6 Impairment - non financial assets
The carrying value of the group’s
non-financial assets, other than
inventories, and deferred tax assets,
are reviewed at each reporting date
to determine whether there is any
indication of impairment. If any
such indication exists, the asset’s
recoverable amount is estimated.
For goodwill, and intangible assets
that have indefinite useful lives or
that are not yet available for use, the
recoverable amount is estimated each
year at the same time.
The recoverable amount of an asset
or cash- generating unit is the greater
of if it’s value in use and its fair value
less costs to sell. In assessing value in
use, the estimated future cash flows
are discounted to their present value
using a pre-tax discount rate that
reflects current market assessments
of the time value of money and the
risks specific to the asset. For the
purpose of impairment testing, assets
that cannot be tested individually are
grouped together in to the smallest
group of assets that generates cash
inflows from continuing use that
are largely independent of the cash
inflows of other assets or groups
of assets (“cash- generating unit or
CGU”) for the purposes of goodwill
impairment testing, goodwill acquired
in a business combination is allocated
to the group of CGUs that is expected
118 United Motors Lanka PLC | Annual Report 2013/14
to benefit from the synergies of the
combination. This allocation is subject
to an operating segment ceiling test
and reflects the lowest level at which
that goodwill is monitored for internal
reporting purposes.
The group’s corporate assets do not
generate separate cash inflows. If
there is an indication that a corporate
asset may be impaired, then the
recoverable amount is determined for
the CGU to which the corporate asset
belongs.
An impairment loss is recognized
if the carrying amount of asset or
its cash-generating unit exceeds
its estimated recoverable amount.
Impairment losses are recognised
in the statement of comprehensive
income.
An impairment loss in respect of
goodwill is not reversed. In respect
of other assets, impairment losses
recognized in prior periods are
assessed at each reporting date for
any indications that the loss has
decrease or no longer exists. An
impairment loss is reversed if there
has been a change in the estimates
used to determine the recoverable
amount. An impairment loss is
reversed only to the extent that the
asset’s carrying amount does not
exceed the carrying amount that
would have been determined net of
depreciation or amortisation, if no
impairment loss had been recognised.
3.5 Liabilities and provisions
3.5.1 Provisions
A provision is recognised in the
statement of financial position
when the company has a legal or
constructive obligation as a result of
a past event and it is probable that an
outflow of economic benefits will be
required to settle the obligation.
3.5.2 Dividends payable
Provision for final dividends is
recognized at the time the dividend
recommended and declared by the
Board of Directors, is approved by
the shareholders. Interim dividends
payable is recognised when the Board
approves such dividend in accordance
with the provisions of the Companies
Act No. 07 of 2007.
Dividend for the year that are
approved after the reporting period
are disclosed under events after the
reporting period in accordance with
the Sri Lanka Accounting standards
LKAS 10.
3.5.3 Employee benefits
Defined contribution plans
A defined contribution plan is a
post-employment plan under which
an entity pays fixed contribution into
a separate entity and will have no
legal or constructive obligation to
pay further amounts. Obligations for
contributions to defined contribution
plans are recognised as an employee
benefit expense in the statement of
comprehensive income in the periods
during which services are rendered by
employees.
Employees’ Provident Fund
The company and employees
contribute 12% and 10% respectively
of the salary of each employee to
the approved Private Provident fund.
Other companies of the group and
their employees contribute at 12%
and 8% respectively to the Employees’
Provident Fund managed by the
Central Bank of Sri Lanka.
Employees’ Trust Fund
The company /group contribute 3%
of the salary of each employee to the
Employees’ Trust Fund managed by
Central Bank of Sri Lanka.
Contributions to defined contribution
plans are recognised as an expense
in the statement of comprehensive
income as incurred.
Defined benefit plans - retiring gratuity
A defined benefit plan is a postemployment benefit plan other than
a defined contribution plan. The
company and the group are liable
to pay retirement benefits under the
Payment of Gratuity Act, No 12 of
1983. The liability recognized in the
financial statements in respect of
defined benefit plans is the present
value of the defined benefit obligation
as at the reporting date. The defined
benefit obligation is calculated by
qualified actuary as at the reporting
date using the Projected Unit Credit
(PUC) method as recommended by
LKAS 19 - “Employee benefits”. Such
actuarial valuations will be carried out
annually as at the reporting date.
In respect of any gains and losses
arising from actuarial valuation
that arise in calculating the group’s
obligation in respect of employee
benefits, is recognised in other
comprehensive income and the
related staff cost and other cost
are recognized in the profit or loss.
The company’s liability arising on
retirement benefits of employees
joined prior to 1992/93 is partly
externally funded through investment
in NDB Mutual Funds. The gratuity
liability of the employee joined after
1992 is externally funded and a policy
agreement has been entered in to
with AIA Insurance which covers 557
employees of the company as at 31
March 2014.
Subsidiaries and jointly controlled
entities
All the subsidiaries & jointly controlled
entities have adopted actuarial
valuation method in line with group
accounting policies.
The gratuity liability of subsidiaries
and jointly controlled entities is partly
externally funded with AIA Insurance
PLC.
3.5.4 Capital commitments &
contingencies
Contingent liabilities are possible
obligations whose existence will be
confirmed only by uncertain future
events or present obligations where
the transfer of economic benefits is
not probable or cannot be reliably
measured. Capital commitment and
contingent liabilities of the group are
disclosed in the respective notes to
the Financial Statements.
3.5.5 Events after the reporting date
The materiality of the events after the
reporting date has been considered
and appropriate adjustments and
provisions have been made in the
financial statements wherever
necessary.
3.6
Statement of comprehensive
income
3.6.1 Revenue recognition
Revenue is recognised to the extent
that it is probable that the economic
benefit will flow to the group and the
associated costs incurred or to be
incurred can be reliably measured.
Revenue is measured at the fair
value of the consideration received
or receivable, net of sales returns,
trade discounts and revenue related
taxes. Group Revenue is shown after
eliminating intercompany sales in
full. The following specific criteria are
used for the purpose of recognition of
revenue.
3.6.2 Sale of goods
Revenue from the sale of goods
is recognised in the statement
of comprehensive income when
significant risks and rewards of
ownership have been transferred to
the buyer.
3.6.3 Services rendered
Revenue for services rendered
is recognised in the statement
of comprehensive income after
completion of the service.
United Motors Lanka PLC | Annual Report 2013/14 119
Notes to the financial statements contd.
3.6.4 Facilitation fee
Facilitation fee is recognised in the
statement of comprehensive income
at the point of invoicing to the
supplier.
3.6.5 Profit on disposal of property, plant
& equipment
Profits or losses resulting from
disposal of property, plant &
equipment have been accounted
on cash basis in the statement of
comprehensive income.
3.6.6 Rental income
Rental Income is recognised on an
accrual basis.
3.6.7 Dividend income
Dividend income is recognised in the
statement of comprehensive income
on the date that the group’s right to
receive payment is established, which
in the case of quoted securities is the
ex-dividend date.
3.6.8 Interest income
Interest income is recognized as
it accrues in the statement of
comprehensive income using effective
interest method.
3.6.9 Expenditure
All expenditure incurred in running
of the business and in maintaining
the property, plant & equipment in a
state of efficiency has been charged to
revenue in arriving at the profit for the
year. For the purpose of presentation
of statement of comprehensive
income , the Directors are of the
opinion that function of expense
method present fairly the elements
of the enterprise’s performance,
hence such presentation method is
adopted. Expenditure incurred for
the purpose of acquiring, expanding
or improving assets of a permanent
nature by means of which to carry
on the business or for the purpose of
increasing the earning capacity of the
business has been treated as capital
expenditure.
Repairs and renewals are charged
to the statement of comprehensive
income in the year in which the
expenditure is incurred. The profit
earned by the company is before
income tax expense and after making
provision for all known liabilities and
for the depreciation of property, plant
& equipment.
3.6.10 Warranties
Costs incurred by the company under
the terms of the warranty agreement
between principal suppliers are
reimbursed to the company. Any
amounts that are not reimbursed
under the warranty agreement
are charged to the statement of
comprehensive income.
3.6.11 Finance costs / income
Finance costs comprises interest
payable on all financial liabilities such
as term loans, overdrafts and finance
leases. Finance income comprises
interest income, dividend income,
foreign exchange gain and all other
income received or receivable as a
result of holding financial asset.
The interest component of finance
lease payment is recognised in the
financial statements using effective
rate method.
3.6.12 Income tax expense
Income tax on the profit for the year
comprises current and deferred tax.
Income tax is recognised directly
in the statement of comprehensive
income except to the extent that it
relates to items recognised directly in
equity or other comprehensive income.
3.6.13 Current tax
Current tax is the expected tax
payable on the taxable income for the
year, using tax rates enacted at the
reporting date, and any adjustment
made to tax payable in respect of
previous years.
120 United Motors Lanka PLC | Annual Report 2013/14
3.6.14 Deferred tax
Deferred tax is recognized in respect
of temporary differences between
the carrying amounts of assets and
liabilities for financial reporting
purposes and the amounts used for
taxation purposes.
Deferred tax is not recognized for;
temporary differences on the
initial recognition of assets and
liabilities in a transactions that
is not a business combination
and that affects neither
accounting nor taxable profit or
loss.
temporary differences relating
to investments in subsidiaries,
to the extent that the group is
able to control the timing of
the reversal of the temporary
differences and it is probable
that they will not reverse in the
foreseeable future; and
taxable temporary differences
arising on the initial recognition
of goodwill.
The measurement of deferred tax
reflects the tax consequences that
would follow the manner in which the
company and the group expects, at
the end of the reporting period., to
cover or settle the carrying amount of
its assets and liabilities.
Deferred tax is measured at the tax
rates that are expected to be applied
to temporary differences when they
reverse, using tax rates enacted or
substantively enacted at the reporting
date.
Deferred tax assets and liabilities are
offset if there is a legally enforceable
right to offset current tax liabilities
and assets, and they relate to taxes
levied by the same tax authority
on the same taxable entity, or on
different tax entities, but they intend
to settle current tax liabilities and
assets on a net basis or their tax
assets and liabilities will be realized
simultaneously.
A deferred tax assets is recognized
for unused tax losses, tax credits and
deductible temporary differences to
the extent that it is probable that the
future taxable profits will be available
against which they can be utilized.
Deferred tax assets are reviewed at
each reporting date and are reduced
to the extent that it is no longer
probable that the related tax benefit
will be realized, based on the level of
future taxable profit forecasts and tax
planning strategies.
3.6.15 Withholding tax on dividends
(WHT)
Withholding tax on dividends
distributed by the subsidiaries
and jointly control entity.
Dividends received by the
company out of taxable profit of
the subsidiaries are subject to
10% deduction at source.
Withholding tax on dividends
distributed by the company.
Withholding tax that arises from
the distribution of dividends by
the company is recognized at
the time the liability to pay the
related dividend is recognized.
3.6.16 Value Added Tax (VAT)
The company and its subsidiaries
are liable to pay Value Added Tax on
taxable supplies at the specified rates.
3.6.17 Economic Service Charge (ESC)
The company and its subsidiaries are
liable to pay Economic Service Charge
at specified rates where applicable.
3.6.18 Nations Building Tax (NBT)
The company and its subsidiaries are
liable to pay National Building Tax
(NBT) at specified rates.
4.
Basic earnings per share
(EPS)
The financial statements present
basic earnings per share (EPS) for
its ordinary shareholders. The basic
EPS is calculated by dividing the
profit or loss attributable to ordinary
shareholders of the company by the
weighted average number of ordinary
shares outstanding during the period.
5.
Related party transactions
Disclosure has been made in respect
of the transactions in which one party
has the ability to control or exercise
significant influence over the financial
and operating policies/decisions of
the other, irrespective of whether a
price is charged.
6.
Operating segments
An operating segment is a component
of the group that engages in
business activities from which it may
earn revenues and incur expenses,
including revenues and expenses
that relate to transactions with, any
of the group’s other segments. All
operating segments’ operating results
are reviewed by CEO/ED to make
decisions about resource allocation
and performance assessment
Segment results that are reported to
the CEO/ED include items directly
attributable to a segment as well
as those that can be allocated on a
reasonable basis.
Segment results, assets and liabilities
include items directly attributable to
a segment as well as those that can
be allocated on a reasonable basis.
Unallocated items comprise mainly
investments (other than investment
property) & related revenue, loans
& borrowings, related expenses,
corporate and head office expenses
and income tax assets & liabilities.
Segment capital expenditure is
the total cost incurred during the
year to acquire property, plant and
equipment.
Inter-segment pricing is determined
on an arm’s length basis.
The activities of the group are within
Sri Lanka. Consequently, the economic
environment in which the company
operated is not subject to risk and
rewards that are significantly different
on a geographical basis. Hence,
disclosure by geographical region is
not provided.
7.
Cash flow statement
The statement of cash flows has
been prepared by using the “indirect
method” of preparing cash flows
in accordance with the Sri Lanka
Accounting Standard – LKAS 7 on ‘
Statement of cash flows’.
Cash and cash equivalents
comprise of short- term, highly
liquid investments that are readily
convertible to known amounts of cash
and are subject to an insignificant
risk of changes in value. Cash and
cash equivalents as referred to in the
statement of cash flows comprised of
those items as explained in note 26.
The statement of cash flows is given
on page 111.
8.
New accounting standards
issued not yet adopted
Standards issued but not yet effective
up to the date of issuance of the
Group’s financial statements are listed
below. This listing is of standards
and interpretations issued, which
the Group reasonably expects to be
applicable at a future date. The Group
intends to adopt those standards
when they become effective.
United Motors Lanka PLC | Annual Report 2013/14 121
Notes to the financial statements contd.
SLFRS 10-Consolidated financial
statements
The objective of this SLFRS is
to establish principles for the
presentation and preparation of
consolidated financial statements
when an entity controls one or more
other entities.
An investor is expected to control an
investee if and only if the investor has
all of the following;
Owner over the investee; exposure,
or rights, to variable returns from
its involvement with the investee;
an ability to use its power over the
investee to affect the amount of the
investor’s returns.
SLFRS 10 will become effective from
1 April 2014 for the group with early
adoption permitted.
SLFRS 11-Joint arrangements
SLFRS 11 replaces LKAS 31 Interests
in joint ventures and SIC-13 on Jointlycontrolled entities - Non-monetary
contributions by ventures. SLFRS 11
removes the option to account for
Jointly Controlled Entities (JCEs) using
proportionate consolidation. Instead,
JCEs that meet the definition of a joint
venture must be accounted for using
the equity method. The application
of this new standard will impact the
financial position of the Group. This
is due to the cessation proportionate
consolidating of joint ventures being
changed to equity accounting. This
standard becomes effective for annual
periods beginning on or after
1 January 2014.
SLFRS 12 Disclosure of interests in
other entities
SLFRS 12 includes all of the
disclosures that were previously in
LKAS 27 related to consolidated
financial statements, as well as all of
the disclosures that were previously
included in LKAS 31 and LKAS
28. These disclosures relate to an
entity’s interests in subsidiaries,
joint arrangements, associates and
structured entities. A number of new
disclosures are also required. This
standard becomes effective for annual
periods beginning on or after
1 January 2014.
SLFRS 13-Fair Value Measurement
This SLFRS defines fair value, sets
out in a single SLFRS a framework
for measuring fair value; and
requires disclosures about fair value
measurements.
This SLFRS will become effective for
the Group from 1 April 2014. Earlier
application is permitted.
This SLFRS shall be applied
prospectively as of the beginning of
the annual period in which it is initially
applied. The disclosure requirements
of this SLFRS need not be applied in
comparative information provided for
periods before initial application of
this SLFRS.
SLFRS 9- Financial instruments
The objective of this SLFRS is to
establish principles for the financial
reporting of financial assets and
financial liabilities that will present
relevant and useful information to
users of financial statements for their
assessment of the amounts, timing
and uncertainty of an entity’s future
cash flows.
An entity shall apply this SLFRS to all
items within the scope of LKAS 39
financial instruments - recognition &
measurement. The effective date of
this standard has been deferred.
122 United Motors Lanka PLC | Annual Report 2013/14
9
Revenue
Group
Brand new vehicles
Spare parts, repairs & services
Lubricants & car care products
Facilitation fee
Local charges on new vehicles
Hiring
Tractors & accessories
Three wheelers
Motor cycles
Tyres
Company
2014
Rs.’000
2013
Rs.’000
2014
Rs.’000
2013
Rs.’000
6,905,622
2,524,161
702,399
161,084
1,187,357
124
526,785
1,526,654
356,211
13,890,397
11,335,618
1,891,290
589,981
299,978
1,168,733
1,116
3,595
560,817
1,527,656
397,796
17,776,580
3,063,231
2,271,392
364,787
161,084
1,179,787
911
7,041,192
5,353,131
1,661,791
303,537
299,978
1,154,475
1,330
8,774,242
9.1
The detailed segmental review is given under note 43 to the financial statements.
9.2
Free service arrangement - The company and the group do not defer revenue component applicable to free service
arrangements and recognised full revenue at the point of invoicing. The company / group generally provide three
labour free services. According to past records, the cost of labour of such free services is immaterial and the
company/group is of the view that this does not have a material impact on the result of these financial statements.
9.3
Warranty obligation - A standard warranty period / Kms is agreed with the principal for new vehicle sales. The cost
incurred by the company in respect of replacements within the warranty period, is reimbursed by the principal
provided that the claims are within the terms agreed with the principal from the date of imports. The company has
no warranty liability in respect of past sales which can occur in future since the cost is reimbursed by the principal
other than in a situation where the company gives warranty period commencing from the date of sale which is beyond
the warranty period given by the principal.
The company estimates this future liability on the extended warranty period is insignificant based on the past
records. Therefore revenue has not been deferred.
10
Other income
Group
Rent income
Profit on disposal of property , plant & equipment
Award received from principal
Staff loan interest
Commission on insurance
Valuation fee
Sundry income (note 10.1)
Company
2014
Rs.’000
2013
Rs.’000
2014
Rs.’000
2013
Rs.’000
915
16,227
3,297
828
5,217
74
26,448
53,006
1,645
14,685
44,835
732
6,396
236
17,851
86,380
13,451
13,630
3,297
828
5,217
74
5,764
42,261
11,718
11,596
44,835
732
6,396
236
5,068
80,581
United Motors Lanka PLC | Annual Report 2013/14 123
Notes to the financial statements contd.
10
Other income contd.
10.1 Sundry income
Group
Scrap sales
Transport income
Miscellaneous
11
Company
2014
Rs.’000
2013
Rs.’000
2014
Rs.’000
2013
Rs.’000
5,764
7,763
12,921
26,448
3,486
6,115
8,250
17,851
5,764
5,764
5,068
5,068
Other expenses
Group
Losses on warranty claims
Provision for slow moving / obsolete inventories
Impairment losses and write offs on loans and receivables
12
Company
2014
Rs.’000
2013
Rs.’000
2014
Rs.’000
2013
Rs.’000
4,498
35,621
14,027
54,146
28,630
13,609
42,239
28,875
882
29,757
.
30,178
8,320
38,498
Profit from operations
12.1 Operating profit is stated after charging all expenses including the following:
Group
Depreciation on property, plant & equipment (note 17)
Depreciation on investment property (note 18)
Amortization of intangible assets (note 19)
Auditors’ remuneration (note 12.1.1)
Tax compliance / consultancy charges
Directors’ emoluments
Personnel cost (note 12.1.2)
Donations
Legal charges
Inventory written off during the year
124 United Motors Lanka PLC | Annual Report 2013/14
Company
2014
Rs.’000
2013
Rs.’000
2014
Rs.’000
2013
Rs.’000
129,399
4,368
4,868
849
81,554
719,418
509
2,815
659
88,913
4,283
5,011
715
60,724
653,975
364
2,755
1,200
55,923
513
2,886
3,386
255
66,397
537,003
430
2,143
-
34,345
298
2,951
3,524
325
60,074
484,589
103
2,457
-
12.1.1 Auditor’s remuneration
Group
Audit services
Audit related services
Non audit services
Company
2014
Rs.’000
2013
Rs.’000
2014
Rs.’000
2013
Rs.’000
3,910
562
396
4,868
3,885
529
597
5,011
2,450
562
374
3,386
2,450
529
545
3,524
12.1.2 Personnel costs
Group
Salaries and bonus
Contributions to defined contribution plan
Contributions to employee defined benefit plans (gratuity)
Others
The average number of employees as at 31 March
13
Company
2014
Rs.’000
2013
Rs.’000
2014
Rs.’000
2013
Rs.’000
611,870
65,097
21,225
21,226
719,418
552,774
55,073
26,294
19,834
653,975
456,102
45,518
14,936
20,447
537,003
406,925
37,559
20,589
19,516
484,589
1,168
1,119
609
562
Finance income and finance costs
13.1 Recognized in profit or loss
Group
Finance income
Income from unimpaired financial assets:
Interest on call deposit
Interest on amounts due from related parties
Income from unit trust investments
Foreign exchange gains
Net gains on disposal of available for sale financial assets
Dividend income from available for sale financial assets
Dividend income from investments in related companies
Net change in fair value of unit trust investments
Total finance income
Finance costs
Expenses on financial liabilities measured at
amortized cost:
Interest on finance leases
Interest on bank borrowings
Interest on overdrafts
Foreign exchange losses
Total finance costs
Net finance income recognized in profit or loss
Company
2014
2013
2014
2013
Rs.’000
Rs.’000
Rs.’000
Rs.’000
37,961
407
89,667
41,826
74,484
52,544
3,552
300,441
42,200
408
1,324
53,224
4,894
21,955
3,053
127,058
31,831
15,242
89,667
25,885
74,484
52,544
87,161
3,552
380,366
24,268
18,839
1,324
25,910
4,894
21,955
288,495
3,053
388,738
(2,251)
(95,548)
(7,169)
(23,076)
(128,044)
172,397
(2,911)
(95,050)
(13,881)
(111,842)
15,216
(15,890)
(778)
(22,774)
(39,442)
340,924
(15,742)
(2,958)
(18,700)
370,038
United Motors Lanka PLC | Annual Report 2013/14 125
Notes to the financial statements contd.
13
Finance income and finance costs contd.
13.2 Recognized in other comprehensive income
Group
2014
Rs.’000
Net change in fair value of available for sale
financial assets
14
Company
2013
Rs.’000
(2,686)
(2,686)
156,901
156,901
2014
Rs.’000
(2,686)
(2,686)
2013
Rs.’000
156,901
156,901
Income tax expenses
Group
Current tax expense (note 14.1)
Adjustments in respect of prior years
Deferred tax expense
Deferred tax asset recognized during the year (note 31.1)
Charge for deferred tax liability during the year (note 31.2)
Company
2014
Rs.’000
2013
Rs.’000
2014
Rs.’000
2013
Rs.’000
571,658
(3,577)
568,081
717,984
(5,596)
712,388
494,064
4,432
498,496
560,130
560,130
(3,379)
10,281
6,902
574,983
(10,577)
3,785
(6,792)
705,596
(6,286)
9,083
2,797
501,293
(5,819)
1,972
(3,847)
556,283
14.1 Reconciliation between accounting profit to income tax expense:
Group
2014
Rs.’000
Company
2013
Rs.’000
2014
Rs.’000
Profit before income tax expense
Disallowable expenses
Exempt dividends and other non business income
Allowable expenses
Statutory income from business
Income from other sources
Total statutory income / assessable income
Tax losses
Taxable income
2,180,271
619,413
(385,987)
(350,459)
2,063,238
47,073
2,110,311
(10,994)
2,099,317
2,713,039
747,783
(587,359)
(319,520)
2,553,943
74,178
2,628,121
(11,452)
2,616,669
Standard tax rate
Concessionary tax rate
Taxable income liable at standard rate
Taxable income liable at concessionary rate
Income tax at standard rate
Income tax at concessionary rate
Income tax for the year
28%
2%
2,037,198
62,119
570,416
1,242
571,658
28%
2%
2,560,197
56,472
716,855
1,129
717,984
28%
28%
1,764,514
494,064
494,064
2,000,464
560,130
571,658
717,984
494,064
560,130
26%
26%
25%
23%
Total tax for the year
Effective tax rate
126 United Motors Lanka PLC | Annual Report 2013/14
1,984,058
336,077
(373,455)
(229,239)
1,717,441
47,073
1,764,514
1,764,514
2013
Rs.’000
2,443,045
256,531
(554,087)
(188,864)
1,956,625
43,839
2,000,464
2,000,464
560,130
14.2 Income tax provisions
(a)
In terms of the provisions of the Inland Revenue Act, No. 10 of 2006 and amendments thereto, the taxable profit of
the company & subsidiaries are liable for income tax at 28% (2013-28%) except for the ‘taxable profit’ of UMPDL
which is liable at 2% on turnover in accordance with an agreement entered in to with the Board of Investments of Sri
Lanka under section 17 of the BOI Act No.4 of 1978 & will be liable at the said rate till the year 2022.
(b )
The utilisation of tax losses brought forward is restricted to 35% of current year’s statutory income. Unabsorbed tax
losses can be carried forward indefinitely.
The tax losses carried forward by the group entities as at 31 March 2014 amounts to Rs 123,884,172
(Rs 124,680,676 in 2013).
(c)
With effect from 1 April 2012, liability to Economic Service Charge (ESC) was restricted to companies with tax losses
and exempt income. ESC paid is available as income tax credit for a period of four subsequent years. In instances
where recoverability is not possible due to tax losses, sums paid are written off to the income statement.
(d )
Deferred tax has been computed using a current tax rate of 28% (2013 - 28%) for the company & the group (note 31).
15
Earnings per share
Basic earnings per share
The company’s and the group’s earnings per share is computed on the net profit attributable to equity holders of the company
and the weighted average number of ordinary shares in issue during the year as required by LKAS 33 “Earnings per share”
Group
Amount used as numerator
Profit attributable to equity holders of the parent
company (Rs.’000)
Amount used as denominator
Weighted average number of ordinary shares (‘000)
Basic earnings per share (Rs.)
Company
2014
2013
2014
2013
1,607,721
2,012,914
1,482,765
1,886,762
67,267
67,267
67,267
67,267
23.90
29.92
22.04
28.05
United Motors Lanka PLC | Annual Report 2013/14 127
Notes to the financial statements contd.
16
Dividend per share
Group
Company
2014
Dividend
Per share
Final dividend paid - 2011/12
First interim dividend
paid - 2012/13
Second interim dividend
paid - 2012/13
Final dividend paid - 2012/13
First interim dividend
paid - 2013/14
Second interim dividend
paid - 2013/14
Total dividend
2013
Rs.’000
Dividend
Per share
-
-
-
2014
Rs.’000
Dividend
Per share
6
403,603
-
3
3
4
201,801
269,068
3
201,801
3
201,801
-
13
874,471
9
Number of ordinary
shares (‘000)
Dividend per share (Rs)
2013
Rs.’000
Dividend
Per share
Rs.’000
-
-
6
403,603
201,801
-
-
3
201,801
-
-
3
4
201,801
269,068
-
-
-
-
3
201,801
-
-
-
3
201,801
-
-
605,404
13
874,471
9
605,404
67,267
13.00
67,267
9.00
67,267
13.00
67,267
9.00
As required by section 56(2) of the Companies Act No 07 of 2007, the Board of Directors has confirmed that the company
satisfies the solvency test in accordance with section 57 of the Companies Act No 07 of 2007, and has obtained a
certificate from the auditors, prior to declaring the dividend.
17
Property, plant & equipment
17.1 Group
Land
Cost
As at 1 April
Additions
Adjustment to buildings
Reclassification to
intangible assets
Reclassification to investment
property
Disposals
As at 31 March
Accumulated depreciation
As at 1 April
Charge for the year
Reclassification to
intangible assets
Disposals
As at 31 March
Carrying amount
Building Furniture &
fittings
Office
equipment
Rs. ‘000
Rs. ‘000
Rs. ‘000
Rs. ‘000
Electrical
fixture &
fittings
Rs. ‘000
1,760,000
530,195
-
238,559
76,825
-
23,442
15,173
-
45,234
14,643
-
48,548
11,932
-
Machinery
& tools
Rs. ‘000
Motor
vehicles
free hold
Rs. ‘000
Motor
vehicles
lease hold
Rs. ‘000
124,662
50,280
-
209,454
81,061
-
63,776
-
Reference Computers
books
Rs. ‘000
107
-
Total
Total
as at
as at
31.03.2014 31.03.2013
Rs. ‘000
Rs. ‘000
Rs. ‘000
103,642
30,141
-
2,617,424
810,250
-
2,468,637
225,593
4,302
-
-
-
-
-
-
-
-
-
-
-
(750)
2,290,195
315,384
38,615
(75)
59,802
60,480
(200)
174,742
(21,959)
268,556
63,776
107
(149)
133,634
(22,383)
3,405,291
(59,964)
(20,394)
2,617,424
-
81,627
20,088
15,255
3,110
25,829
6,752
27,374
8,287
57,892
11,498
85,846
56,471
36,134
8,870
107
-
76,076
14,323
406,140
129,399
337,121
88,913
-
101,715
18,365
(19)
32,562
35,661
(200)
69,190
(15,256)
127,061
45,004
107
(66)
90,333
(15,541)
519,998
(750)
(19,144)
406,140
2,290,195
213,669
20,250
27,240
24,819
105,552
141,495
18,772
-
43,301
2,885,293
2,211,284
Capital work in
progress (note 17.4)
Carrying amount as at 31 March
62,065
-
2,947,358
2,211,284
Details of land and building owned by the group are as follows:
Building
Location / address
100, & 100A ,Hyde Park Corner, Colombo 02
143 & 145 Majeed Place, Orugodawatta
Vauxhall Street, Colombo 02.
Meetotamulla, Orugodawatta
Maligawa Road, Ratmalana.
Navatkuli, Jaffna.
Total
No. of
building
units
Land
Extent
Sq. / Ft
Acre
Rood
Perch
Cost
Rs.’000
Revaluation
Rs.’000
Total Value
Rs.’000
9
80,322
1
3
0.54
76,791
984,709
21
99,976
7
1
9.13
63,940
420,560
1,061,500
484,500
1
819
-
1
10.35
161,325
52,675
214,000
-
-
-
1
28.86
74,732
-
74,732
12
6,639
9
3
36.50
442,840
-
442,840
-
-
1
-
25.69
12,623
-
12,623
43
187,756
18
9
111.07
832,251
1,457,944
2,290,195
128 United Motors Lanka PLC | Annual Report 2013/14
17.2 Company
Land
Cost
As at 1 April
Additions
Disposals
As at 31 March
Accumulated depreciation
As at 1 April
Charge for the year
Disposals
As at 31 March
Carrying amount
Building Furniture &
fittings
Office
equipment
Rs. ‘000
Rs. ‘000
Rs. ‘000
Rs. ‘000
Electrical
fixture &
fittings
Rs. ‘000
Machinery
& tools
Rs. ‘000
Motor
vehicles
free hold
Rs. ‘000
Motor
vehicles
lease hold
Rs. ‘000
Reference Computers
books
1,612,640
530,195
2,142,835
143,175
76,825
220,000
20,382
14,065
34,447
18,383
4,367
22,750
48,464
11,932
60,396
111,489
24,348
(200)
135,637
106,060
1,756
(12,525)
95,291
-
107
107
81,516
27,889
(57)
109,348
2,142,216
691,377
(12,782)
2,820,811
1,998,571
156,839
(13,194)
2,142,216
-
51,470
17,301
68,771
13,772
2,552
16,324
14,482
1,717
16,199
27,297
8,287
35,584
48,624
8,944
(200)
57,368
85,149
6,186
(12,028)
79,307
-
107
107
61,570
10,936
(15)
72,491
302,471
55,923
(12,243)
346,151
280,896
34,345
(12,770)
302,471
2,142,835
151,229
18,123
6,551
24,813
78,269
15,984
-
-
36,857
2,474,660
1,839,745
62,065
2,536,725
1,839,745
Rs. ‘000
Capital Work in Progress (note 17.4)
Carrying amount as at 31 March
Total
Total
as at
as at
31.03.2014 31.03.2013
Rs. ‘000
Rs. ‘000
Rs. ‘000
Details of land and building owned by the company are as follows:
Building
Location / address
100, Hyde Park Corner,
Colombo 02
143 & 145 Majeed Place,
Orugodawatta
No. of
building
units
Land
Extent
Sq. / Ft
Acre
Rood
Perch
8
70,052
1
2
3.70
Cost
Rs.’000
Revaluation
Rs.’000
Total Value
Rs.’000
25,000
889,140
914,140
21
99,976
7
1
9.13
63,940
420,560
484,500
Vauxhall Street, Colombo 02.
1
819
-
1
10.35
161,325
52,675
214,000
Meetotamulla, Orugodawatta
-
-
-
1
28.86
74,732
-
74,732
12
6,639
9
3
36.50
442,840
-
442,840
Maligawa Road, Ratmalana.
Navatkuli, Jaffna.
Total
-
-
1
-
25.69
12,623
-
12,623
42
177,486
18
8
114.23
780,460
1,362,375
2,142,835
17.3 Revaluation
Company:
(i)
In March 1993, the company’s land costing Rs 93,335,951 was revalued by an independent Chartered valuer. The
surplus arising out of such revaluation amounting to Rs 49,000,000 was fully utilised for issue of bonus shares.
(ii)
In December 1999, another revaluation has been carried out by an independent Chartered valuer to reflect the
market value.
The total surplus arising out of this revaluation amounting to Rs 141,853,649 has been fully utilised for the issue of
bonus shares during 2002/2003.
(iii)
In March 2005, a third revaluation was carried out by an independent Chartered valuer to reflect market value of
land. The total surplus arising out of such revaluation amounting to Rs 398,820,000 has been credited to the capital
reserve on revaluation of land.
(iv)
In March 2010, a further revaluation was carried out by Mr J M S Bandara, a qualified independent valuer on the 31
March 2010 to reflect market value of land. The resultant surplus of Rs 827,883,000 has been credited to the capital
reserve on revaluation of land.
United Motors Lanka PLC | Annual Report 2013/14 129
Notes to the financial statements contd.
17
Property, plant & equipment
17.4 Capital work in progress
Group
As at 1 April
Additions during the year
As at 31 March
Company
2014
Rs.’000
2013
Rs.’000
2014
Rs.’000
2013
Rs.’000
62,065
62,065
-
62,065
62,065
-
17.5 Fully depreciated assets
Cost of fully depreciated assets which are still in use as at reporting date is as follows:
Group
Building
Furniture and fittings
Office equipment
Electrical fixture & fittings
Machinery & tools
Motor vehicles
Computers
Reference books
Total
Company
31.03.2014
Rs.’000
31.03.2013
Rs.’000
31.03.2014
Rs.’000
31.03.2013
Rs.’000
42,978
14,985
17,338
25,198
41,374
113,872
64,840
107
320,692
42,978
14,030
20,025
16,355
34,042
106,511
45,715
107
279,763
42,977
11,235
13,048
24,186
35,757
70,237
54,392
107
251,939
42,977
10,238
12,545
16,355
34,042
82,173
37,092
107
235,529
17.6 No restrictions existed on the title of the property, plant and equipment of the group as at the reporting date.
17.7 There were no items of property, plant and equipment pledged as security for liabilities, other than lease hold
vehicles.
17.6 There were no compensation received/ receivable from third parties for items of property, plant and equipment that
were impaired, lost or given up.
130 United Motors Lanka PLC | Annual Report 2013/14
18
Investment property
Group
Cost
As at 1 April
Adjustment to investment property
Re-classification from property, plant & equipment
As at 31 March
2014
Rs.’000
2013
Rs.’000
2014
Rs.’000
2013
Rs.’000
59,964
59,964
59,964
59,964
152,495
152,495
148,193
4,302
152,495
-
-
604
513
1,117
306
298
604
59,964
59,964
151,378
151,891
Accumulated depreciation
As at 1 April
Charge for the year
As at 31 March
Net book value as at 31 March
Company
Details of investment property are as follows:
Building
Location / address
No. of
buildings
Land
Extent
Value
Rs.’000
Sq. / Ft
Acre
Rood
Perch
Value
Rs.’000
Value
of the
property
Rs.’000
Group
Lot 1B, Bandarawatta, Kaduwela Road, Biyagama
-
-
-
5
2
27.00
59,964
59,964
1
10,270
4,302
-
-
36.84
148,193
152,495
Company
100A ,Hyde Park Corner, Colombo 02
Group:
The land situated at Lot 1B, Bandarawatta, Kaduwela Road, Biyagama owned by TVS Lanka (Pvt) Ltd (jointly controlled
entity) was revalued by Mr. J.M.S.Bandara, independent qualified valuer on 26 May 2005. The resultant surplus of
Rs 52,163,216 was accounted for in revaluation reserve and further, the same asset was revalued by Mr. J.M.J Fernando,
independent qualified valuer on 24 January 2010 and the resultant surplus of Rs 15,927,805 was accounted for as
revaluation reserve during the year 2009/10. The management has decided to hold this land for capital appreciation and
hence it was classified as investment property using the cost model, therefore it was transferred at its carrying amount
as at the reporting date. According to the valuation done by Mr. J.M.S. Bandara independent qualified valuer on 31 March
2013 fair value of this land is Rs 138 million and there is no significant change to the fair value since then.
The building held by UML Property Development Limited is rented to the parent company, United Motors Lanka PLC. Hence
it does not qualify as an investment property in the consolidated financial statements.
Company:
The company classified part of the land and building as investment property. UML has rented this property to its
subsidiaries and affiliated company (Unimo Enterprises Ltd, Orient Motor Company and TVS Automotives (Pvt) Ltd)
The company recognised investment property at cost and according to the valuation done by Mr. J. M. S. Bandara, qualified
independent valuer in March 2014, fair value of this property is Rs 309 million.
United Motors Lanka PLC | Annual Report 2013/14 131
Notes to the financial statements contd.
19
Intangible assets
Group
Goodwill (note 19.1)
Computer software (note 19.2)
Company
31.03.2014
Rs.’000
31.03.2013
Rs.’000
31.03.2014
Rs.’000
31.03.2013
Rs.’000
15,435
7,054
22,489
15,435
10,817
26,252
4,023
4,023
6,909
6,909
19.1 Goodwill
Group
As at 1 April
Impairment (note 19.1 a)
As at 31 March
Company
2014
Rs.’000
2013
Rs.’000
2014
Rs.’000
2013
Rs.’000
15,435
15,435
15,435
15,435
-
-
19.1.(a) Impairment of goodwill
Goodwill represents the difference between the purchase consideration and the fair value of assets acquired as a result
of the acquisition of balance 50% shares in Unimo Enterprise Ltd (formally known as Associated United Motors Limited)
which was acquired on 3 October 2002, and the acquisition of 50% shares in the jointly controlled entity, TVS Lanka (Pvt)
Limited on 1 August 2003.
No condition has arisen that results in an impairment of goodwill that requires a provision.
19.2 Computer software
Group
Company
2014
Rs.’000
2013
Rs.’000
2014
Rs.’000
2013
Rs.’000
Cost
As at 1 April
Additions
Reclassified from property, plant & equipment
As at 31 March
27,620
605
28,225
26,079
791
750
27,620
14,757
14,757
14,757
14,757
Accumulated amortisation
As at 1 April
Amortisation during the year
Reclassified from property, plant & equipment
As at 31 March
16,803
4,368
21,171
11,770
4,283
750
16,803
7,848
2,886
10,734
4,897
2,951
7,848
7,054
10,817
4,023
6,909
Net book value
19.3 Cost of fully amortized computer software of group amounted to Rs13.4 million.
132 United Motors Lanka PLC | Annual Report 2013/14
19.4 There were no restrictions existed on the title of the intangible assets of the group as at the reporting date. Further
there were no items pledged as security for liabilities.
20
Investments in subsidiaries
Group
Orient Motor Company Ltd
UML Property Development Ltd
UML Agencies & Distributors (Pvt) Ltd
Unimo Enterprises Ltd
21
Company
%
Holding
31.03.2014
Rs.’000
31.03.2013
Rs.’000
31.03.2014
Rs.’000
31.03.2013
Rs.’000
100
100
100
100
-
-
50,000
75,000
1,000
47,400
173,400
50,000
75,000
1,000
47,400
173,400
Investments in Joint venture
Group
TVS Lanka (Pvt) Ltd
Company
%
Holding
31.03.2014
Rs.’000
31.03.2013
Rs.’000
31.03.2014
Rs.’000
31.03.2013
Rs.’000
50
-
-
173,545
173,545
173,545
173,545
Summary of financial information of jointly controlled entities
The aggregate amount (100%) of the assets, liabilities, income, expenses and profits related to the interest in jointly
controlled entities are as follows;
As at 31 March
2014
Rs.’000
2013
Rs.’000
Current assets
Non current assets
Current liabilities
Non current liabilities
Equity
Non controlling interest
2,426,063
245,401
1,488,240
49,493
1,128,287
5,444
2,589,295
260,394
1,687,203
64,656
1,088,070
9,760
Revenue
Expenses
Income tax expenses
Profit / (loss) for the year
5,702,789
696,023
16,717
32,367
5,675,530
774,153
31,717
(1,240)
United Motors Lanka PLC | Annual Report 2013/14 133
Notes to the financial statements contd.
22
Other investments
Group
Non-current investments
Available for sale financial assets (note 22.1)
Increase / (decrease) in market value
Fair value through profit or loss (note 22.2)
Current investments
Fair value through profit or loss (note 22.3)
Company
31.03.2014
Rs.’000
31.03.2013
Rs.’000
31.03.2014
Rs.’000
31.03.2013
Rs.’000
631,860
130,946
762,806
675,867
133,632
809,499
631,860
130,946
762,806
675,867
133,632
809,499
762,806
403,053
403,053
1,212,552
762,806
403,053
403,053
1,212,552
703,552
703,552
-
503,552
503,552
-
22.1 Available for sale financial assets
Equity shares
Group / Company
31.03.2014
No. of
Shares
DFCC Vardhana Bank PLC
442,150
Sampath Bank PLC
120,833
National Development Bank PLC
2,000,000
Commercial Bank of Ceylon PLC
1,250,844
John Keells Holdings PLC
60,000
Aitken Spence Holdings PLC
236,901
Nations Trust Bank PLC
391,846
Diesel & Motor Engineering PLC
111,640
Hatton National Bank PLC - Non voting
150,000
Textured Jersey Lanka PLC
263,768
Distilleries Company of Sri Lanka PLC
100,000
Laugfs Gas PLC
154,933
J. L. Morison Sons & Jones
(Ceylon) PLC - Voting
J. L. Morison Sons & Jones
(Ceylon) PLC - Non voting
-
Cost
31.03.2013
No. of
Shares
Rs.’000
Market
Value
Rs.’000
53,028
20,795
227,994
129,581
11,266
28,958
25,206
91,654
16,800
3,594
18,861
4,123
63,625
22,004
357,200
153,854
13,620
23,193
25,431
56,378
18,000
4,167
20,300
5,034
631,860
Cost
Rs.’000
Market
Value
Rs.’000
442,100
342,189
2,640,992
1,017,512
255,000
124,967
78,803
-
53,022
65,680
301,076
102,206
48,380
15,650
76,264
-
57,959
76,958
435,764
114,979
62,985
14,946
39,796
-
-
28,000
10,297
4,900
762,806
12,000
3,292
675,867
1,212
809,499
22.2 Investments valued at fair value through profit or loss - Non current
Group/Company
31.03.2014
31.03.2013
No of
Units
in ‘000
Cost of
Investment
Rs.’000
Market
Value
Rs.’000
No of
Units
in ‘000
Cost of
Investment
Rs.’000
Market
Value
Rs.’000
-
-
-
36,941
36,941
400,000
400,000
403,053
403,053
Investment in unit trusts
134 United Motors Lanka PLC | Annual Report 2013/14
22.3 Investments valued at fair value through profit or loss - Current
Group
31.03.2014
Investment in unit trusts
31.03.2013
No of
Units
in ‘000
Cost of
Investment
Rs.’000
Market
Value
Rs.’000
No of
Units
in ‘000
Cost of
Investment
Rs.’000
Market
Value
Rs.’000
55,521
55,521
700,000
700,000
703,552
703,552
-
-
-
Company
31.03.2014
Investment in unit trusts
23
31.03.2013
No of
Units
Cost of
Investment
Market
Value
No of
Units
Cost of
Investment
Market
Value
in ‘000
Rs.’000
Rs.’000
in ‘000
Rs.’000
Rs.’000
40,229
40,229
500,000
500,000
503,552
503,552
-
-
-
Inventories
Group
31.03.2014
Rs.’000
Spare parts
Vehicles
Lubricants
Tyres
Others
Less: Provision for slow moving inventories
Work-in-progress
Goods in transit (note 23.1)
627,988
3,047,190
174,532
87,237
28,422
3,965,369
(153,255)
3,812,114
20,480
214,569
4,047,163
Company
31.03.2013
Rs.’000
529,758
2,311,642
191,873
112,006
20,482
3,165,761
(118,293)
3,047,468
142,854
231,719
3,422,041
31.03.2014
Rs.’000
31.03.2013
Rs.’000
517,557
1,368,604
145,336
25,850
2,057,347
(123,702)
1,933,645
20,480
186,328
2,140,453
393,156
819,487
164,708
19,370
1,396,721
(94,827)
1,301,894
33,325
200,740
1,535,959
23.1 Goods in transit
Group
Vehicles
Spare parts
Company
31.03.2014
Rs.’000
31.03.2013
Rs.’000
31.03.2014
Rs.’000
31.03.2013
Rs.’000
123,502
91,067
214,569
178,512
53,207
231,719
100,605
85,723
186,328
159,149
41,591
200,740
United Motors Lanka PLC | Annual Report 2013/14 135
Notes to the financial statements contd.
23
Inventories contd.
23.2 Inventories & trade receivables pledged as security for liabilities of group entities are as follows:
Company
Bank
Facility
Limit
Rs.’000
Loan outstanding
Rs.’000
Orient Motor Company Limited
National Development Bank
Import loan
100,000
100,000
TVS Lanka (Pvt) Ltd
DFCC Vardhana Bank
Sampath Bank
National Development Bank
Commercial Bank
Import
Import
Import
Import
650,000
150,000
200,000
290,000
274,080
86,042
93,238
119,086
TVS Auto Parts (Pvt) Ltd
Sampath Bank
Hatton National Bank
Commercial Bank
Import loan
Import loan
Import loan
20,000
50,000
60,000
20,000
7,271
9,449
TVS Automotives (Pvt) Ltd
Hatton National Bank
Commercial Bank
Import loan
Import loan
180,000
50,000
98,526
46,285
loan*
loan*
loan*
loan*
*Only inventories have been pledged as security for liabilities.
24
Trade and other receivables
Group
31.03.2014
Rs.’000
Trade receivables
Impairment allowance
Loans to employees (note 24.3)
Deposits & pre-payments
ESC recoverable
Facilitation fee receivable
Advances paid
Other receivables (note 24.2)
Total trade and other receivables
1,178,220
(91,821)
1,086,399
Company
31.03.2013
Rs.’000
1,200,117
(73,613)
1,126,504
31.03.2014
Rs.’000
31.03.2013
Rs.’000
441,928
(12,650)
429,278
442,477
(16,942)
425,535
9,898
7,818
9,898
7,818
113,375
5,693
403,569
261,730
1,880,664
118,563
4,481
58,693
94,660
206,192
1,616,911
56,058
403,569
52,759
951,562
57,390
350
58,693
94,660
49,413
693,859
24.1 The group’s exposure to credit risk and impairment losses related to trade and other receivables are disclosed in note 36.
24.2 Other receivables
Group
31.03.2014
Rs.’000
Other receivables
Impairment of other receivables
136 United Motors Lanka PLC | Annual Report 2013/14
272,669
(10,939)
261,730
Company
31.03.2013
Rs.’000
223,230
(17,038)
206,192
31.03.2014
Rs.’000
59,072
(6,313)
52,759
31.03.2013
Rs.’000
64,082
(14,669)
49,413
24.3 Loans to employees
Total loans disbursed to employees amounts to Rs 9.8 million, out of which the movement of loans disbursed to employees
which has exceeded Rs 20,000/- are disclosed as follows:
Group
Non executives
2014
Rs.’000
Balance brought forward as at 1 April
(no of employees - 125)
Loans disbursed during the year
Recovered during the year
Balance carried forward as at 31 March
(no of employees -137)
Company
Executives Non executives
2014
2014
Rs.’000
Rs.’000
Executives
2014
Rs.’000
5,515
6,948
(5,715)
-
5,515
6,948
(5,715)
-
6,748
-
6,748
-
No loans have been granted to the Directors of the company.
24.4 Trade receivables pledged as security for liabilities are given in note 23.2.
25
Amounts due from related parties
Group
Relationship
Orient Motor Company Ltd
Unimo Enterprises Ltd
TVS Lanka (Pvt) Ltd
TVS Auto Parts (Pvt) Ltd
TVS Automotives (Pvt) Ltd
TVS Motor Company Limited
Subsidiary
Subsidiary
Jointly controlled entity
Affiliate
Affiliate
Affiliate
Company
31.03.2014
Rs.’000
31.03.2013
Rs.’000
31.03.2014
Rs.’000
31.03.2013
Rs.’000
224
80
2,976
16,414
19,694
642
65
3,535
16,946
21,188
6,833
11,490
449
161
5,935
24,868
15,149
18,082
1,281
131
6,923
41,566
United Motors Lanka PLC | Annual Report 2013/14 137
Notes to the financial statements contd.
26
Cash & cash equivalents
Group
Favourable balances
Treasury bills
Commercial papers
Call deposits
Cash at bank
Cash In hand
Unfavourable balances
Bank overdrafts used for cash management purposes
Net cash and cash equivalent for the purpose of
cash flow statements
Company
31.03.2014
Rs.’000
31.03.2013
Rs.’000
31.03.2014
Rs.’000
31.03.2013
Rs.’000
57,206
88,865
92,558
238,629
700,000
200,000
224,753
156,505
92,145
1,373,403
37,206
43,733
81,351
162,290
700,000
100,000
224,753
118,822
81,250
1,224,825
(192,249)
46,380
(151,436)
1,221,967
(141,401)
20,889
(90,869)
1,133,956
Overdraft facilities of the company are unsecured. See note 37.2 for details of securities given for related companies.
The group’s exposure to interest rate risk is disclosed in note 36.
27
Stated capital
Group
Balance as at 1 April
Balance as at 31 March
28
Company
No. of
Shares
2014
Rs.’000
2013
Rs.’000
2014
Rs.’000
2013
Rs.’000
67,267,084
67,267,084
336,335
336,335
336,335
336,335
336,335
336,335
336,335
336,335
Capital reserves
Surplus on revaluation of property, plant & equipment
Group
As at 1 April
Adjustment to building / Investment property
As at 31 March
138 United Motors Lanka PLC | Annual Report 2013/14
Company
2014
Rs.’000
2013
Rs.’000
2014
Rs.’000
2013
Rs.’000
1,223,276
1,223,276
1,218,974
4,302
1,223,276
1,189,230
1,189,230
1,184,928
4,302
1,189,230
29
Interest bearing borrowings
Group
2014
Rs.’000
As at 1 April
Obtained during the year
Company
2013
Rs.’000
2014
Rs.’000
2013
Rs.’000
957,415
11,719,150
12,676,565
(11,508,619)
1,167,946
1,576,802
6,893,961
8,470,763
(7,513,348)
957,415
Unamortised finance charges
Balance as at 31 March
(2,354)
1,165,592
(4,566)
952,849
100,100
-
Non current
Current
Total
11,367
1,154,225
1,165,592
19,047
933,802
952,849
100,100
100,100
-
Payments made during the year
4,121,988
4,121,988
(4,021,888)
100,100
1,320,630
2,581,312
3,901,942
(3,901,942)
-
29.1 Loans & borrowings
(a)
Details of group’s interest bearing loans and borrowings, which are measured at amortised cost are given below.
Group
Non current liabilities
Finance lease liabilities
Current liabilities
Finance lease liabilities
Short term loans
(b)
Company
31.03.2014
Rs.’000
31.03.2013
Rs.’000
31.03.2014
Rs.’000
31.03.2013
Rs.’000
Note (d)
11,367
11,367
19,047
19,047
-
-
Note (d)
9,593
1,144,632
1,154,225
9,559
924,243
933,802
100,100
100,100
-
Loans and borrowings which are guaranteed through corporate guarantees given by the parent company, United
Motors Lanka PLC, in favour of its subsidiaries and a related company are described in note 37.2 to these
consolidated financial statements.
United Motors Lanka PLC | Annual Report 2013/14 139
Notes to the financial statements contd.
29
Interest bearing borrowings contd.
(c)
Terms & debt repayment schedule
Terms & conditions of the outstanding loans were as follows:
Group
31.03.2014
Secured bank loans
Short term loans
Finance lease
Effective
interest rate
Year of
Maturity
Market rate
11.25% - 12.75%
2014
2018
31.03.2013
Face
value
Rs.’000
Carrying
value
Rs.’000
Face
value
Rs.’000
Carrying
value
Rs.’000
1,144,632
23,314
1,167,946
1,144,632
20,960
1,165,592
924,243
33,172
957,415
924,243
28,606
952,849
Company
31.03.2014
Short term loans
(d)
Effective
interest rate
Year of
Maturity
8%
2014
31.03.2013
Face
value
Rs.’000
Carrying
value
Rs.’000
Face
value
Rs.’000
Carrying
value
Rs.’000
100,100
100,100
100,100
100,100
-
-
Finance lease obligations
Group
Company
2014
Rs.’000
2013
Rs.’000
Repayments during the year
Gross finance lease liabilities as at 31 March
Finance charges unamortised
Net lease obligations
33,172
33,172
(9,858)
23,314
(2,354)
20,960
Payable as follows:
Between 1-5 years
Less than one year
As at 31 March
11,367
9,593
20,960
As at 1 April
Obtained during the year
140 United Motors Lanka PLC | Annual Report 2013/14
2014
Rs.’000
2013
Rs.’000
41,885
1,563
43,448
(10,276)
33,172
(4,566)
28,606
-
-
19,047
9,559
28,606
-
-
30
Employee benefits
30.1 Retirement benefit obligations
Group
Employees joined before 1992/93
Present value of funded obligations
Present value of unfunded obligations
Present value of funded obligations
Retirement benefit obligation (note 30.5)
Company
31.03.2014
Rs.’000
31.03.2013
Rs.’000
31.03.2014
Rs.’000
31.03.2013
Rs.’000
1,543
169,159
170,702
1,281
23,010
124,808
149,099
150,121
150,121
1,281
1,580
124,808
127,669
30.2 Defined benefit plan
Group
Employees joined before 1992 / 93
Mutual fund (note 30.3)
Employees joined after 1992 / 93
Defined benefit plan (note 30.4)
Company
31.03.2014
Rs.’000
31.03.2013
Rs.’000
31.03.2014
Rs.’000
31.03.2013
Rs.’000
1,071
1,281
1,071
1,281
111,091
112,162
98,744
100,025
105,983
107,054
95,476
96,757
30.3 Retiring gratuity is a defined benefit plan covering employees of the company. The company’s liability arising on
retirement benefits of employees joined prior to 1992/93 is partly externally funded through investments in NDB
Mutual Funds and the value of this fund as at 31 March 2014 is Rs 1,070,946 (2012/13 - Rs 1,281,037).
The gratuity liability of employees joined after 1992/93, is externally funded and an agreement has been entered in
to with AIA Insurance PLC and covers 557 employees of the company as at 31 March 2014.
An actuarial valuation has been carried out by Mr M. Poopalanathan, AIA, of Messrs Actuarial and Management
Consultants (Pvt) Limited. The valuation method used by the actuary is the “Projected Unit Credit Method”, the
method recommended by LKAS 19 - Employee Benefits.
30.4 Movement in fair value of defined benefit plan
Group
2014
Rs.’000
As at 1 April
Expected return on plan
Contribution paid into the plan
Benefits paid by the plan
Benefits payable by the plan
Actuarial gains / (losses) in other comprehensive income
Fair value of the defined benefit plan as at 31 March
98,744
10,230
12,299
(5,334)
(536)
(4,312)
111,091
Company
2013
Rs.’000
81,715
16,229
(4,223)
(7,753)
12,776
98,744
2014
Rs.’000
95,476
10,025
10,832
(5,334)
(536)
(4,480)
105,983
2013
Rs.’000
81,715
12,961
(4,223)
(7,753)
12,776
95,476
The above amount is invested in AIA Insurance PLC.
United Motors Lanka PLC | Annual Report 2013/14 141
Notes to the financial statements contd.
30
Employee benefits contd.
30.5 Movement in the present value of the defined benefit obligations
Group
As at 1 April
Expenses recognised in profit or loss (note 30.6)
Actuarial (gains) / losses in other comprehensive
income (note 30.6)
Benefits paid during the year
Defined benefit obligation as at 31 March
Company
2014
Rs.’000
2013
Rs.’000
2014
Rs.’000
2013
Rs.’000
149,099
30,912
108,109
27,244
127,669
24,417
93,276
20,713
(573)
(8,736)
170,702
27,389
(13,643)
149,099
3,905
(5,870)
150,121
25,544
(11,864)
127,669
30.6 Expenses recognised in statement of comprehensive income
Group
Recognised in profit or loss
Defined benefit obligations
Current service costs
Interest on obligation
Adjustment in respect of provision
Defined benefit plan
Expected return on plan asset
Recognised in other comprehensive income
Defined benefit obligations
Actuarial (gains) / losses recognised during the year
Defined benefit plan
Actuarial (gains) / losses recognised during the year
142 United Motors Lanka PLC | Annual Report 2013/14
Company
2014
Rs.’000
2013
Rs.’000
2014
Rs.’000
2013
Rs.’000
18,418
15,355
(2,861)
30,912
15,911
11,333
27,244
14,173
13,105
(2,861)
24,417
11,219
9,494
20,713
10,230
10,230
(573)
(573)
4,312
4,312
3,739
-
10,025
10,025
-
27,389
27,389
3,905
3,905
25,544
25,544
(12,776)
(12,776)
14,613
4,480
4,480
8,385
(12,777)
(12,777)
12,767
30.7 Actuarial assumptions
Principle actuarial assumptions are as follows:
Group
Rate of discount as at 31 March
Future salary increases
Retirement age
Staff turnover rate
Company
31.03.2014
31.03.2013
31.03.2014
31.03.2013
10.5%
10 - 13%
55 or 60
5%
10.5%
13%
55 or 60
5%
10.5%
13%
55 or 60
5%
10.5%
13%
55 or 60
5%
Assumptions regarding future mortality are based on A67 / 70 Mortality table, issued by the institute of Actuaries, London,
United Kingdom.
30.8 Sensitivity analysis
Value appearing as defined benefit obligation in the financial statements is sensitive to the changes in financial and non financial assumptions used. A sensitivity analysis was carried out as follows:
Group
+ 1%
A percentage point change in the discount rate
Effect on the present value of defined
benefit obligation (Rs. 000)
A percentage point change in the salary escalation rate
Effect on the present value of defined
benefit obligation (Rs. 000)
31
Company
- 1%
+ 1%
- 1%
(10,265)
11,617
(8,335)
9,365
11,857
(10,650)
9,537
(8,629)
Deferred tax assets / liabilities
31.1 Deferred tax assets
Group
As at 1 April
Deferred tax assets recognised on deductible
temporary differences
As at 31 March
Deferred tax assets are attributable to the following:
Retirement benefit obligation
Provisions
Tax losses
Company
2014
Rs.’000
2013
Rs.’000
2014
Rs.’000
2013
Rs.’000
61,500
50,923
35,748
29,929
3,379
64,879
10,577
61,500
6,286
42,034
5,819
35,748
48,124
16,755
64,879
40,897
19,257
1,346
61,500
42,034
42,034
35,748
35,748
United Motors Lanka PLC | Annual Report 2013/14 143
Notes to the financial statements contd.
31
Deferred tax assets / liabilities contd.
31.2 Deferred tax liabilities
Group
As at 1 April
charged during the year
As at 31 March
Deferred tax liabilities are attributable to the following:
Property, plant & equipment
Intangible assets
32
Company
2014
Rs.’000
2013
Rs.’000
2014
Rs.’000
2013
Rs.’000
25,856
10,281
36,137
22,071
3,785
25,856
7,405
9,083
16,488
5,433
1,972
7,405
35,011
1,126
36,137
21,746
4,110
25,856
15,362
1,126
16,488
5,470
1,935
7,405
Trade & other payables
Group
Trade payables
Taxes payable
Dividend payable
Advance received from customers
Other payable (note 32.1)
Company
31.03.2014
Rs.’000
31.03.2013
Rs.’000
31.03.2014
Rs.’000
31.03.2013
Rs.’000
478,283
46,221
55,591
103,194
391,976
1,075,265
397,071
58,886
24,039
153,924
427,076
1,060,996
110,185
5,661
55,591
49,551
222,095
443,083
106,393
42,046
24,039
102,504
239,086
514,068
32.1 Other payable
Group
Accrued charges
Others
33
Company
31.03.2014
Rs.’000
31.03.2013
Rs.’000
31.03.2014
Rs.’000
31.03.2013
Rs.’000
357,667
34,309
391,976
371,983
55,093
427,076
214,777
7,318
222,095
230,227
8,859
239,086
Amounts due to related parties
Group
Orient Motor Company Ltd
Unimo Enterprises Ltd
UML Property Development Ltd
Subsidiary
Subsidiary
Subsidiary
144 United Motors Lanka PLC | Annual Report 2013/14
Company
31.03.2014
Rs.’000
31.03.2013
Rs.’000
31.03.2014
Rs.’000
31.03.2013
Rs.’000
-
-
276
81,274
36,270
117,820
18,522
32,093
50,615
34
Current taxation
Group
2014
Rs.’000
As at 1 April
Income tax on current year profits (note 14)
Under / (over) provision in respect of prior periods (note 14)
Income tax paid
As at 31 March
389,377
571,658
961,035
(3,577)
(837,942)
119,516
Company
2013
Rs.’000
754,088
717,984
1,472,072
(5,596)
(1,077,099)
389,377
2014
Rs.’000
2013
Rs.’000
345,819
494,064
839,883
4,432
(727,172)
117,143
399,456
560,130
959,586
(613,767)
345,819
The income tax liability comprise of:
34.1 Current tax liabilities
124,919
389,377
117,143
345,819
34.2 Current tax receivable
(5,403)
119,516
389,377
117,143
345,819
35
Capital commitments
There are no material capital commitments as at the reporting date.
36
Financial instruments
Overview of financial risk management
The group has exposure to the following risks from its use of financial instruments:
credit risk
liquidity risk
market risk
operational risk
This note presents information about the group’s exposure to each of the above risks, the group’s objectives, policies
and processes for identifying, analysing, evaluating and monitoring the risk and the management of capital of the group.
Further quantitative disclosures are included throughout these consolidated financial statements.
Risk management framework
The Board of Directors has overall responsibility for the establishment and oversight of the group’s risk management
framework.
The group’s risk management policies are established to identify and analyse the risks faced by the group, to set
appropriate risk profile and controls, and to monitor risks and mitigate. Risk management policies and systems are
reviewed regularly to reflect changes in market conditions and the group’s activities.
The Group Audit Committee oversees how management monitors compliance with the group’s risk management policies
and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the Group.
The Group Audit Committee is assisted in its oversight role by Internal Audit. Internal Audit undertakes both regular and ad
hoc reviews of risk management controls and procedures, the results of which are reported to the Audit Committee.
United Motors Lanka PLC | Annual Report 2013/14 145
Notes to the financial statements contd.
36
Financial instruments contd.
36.1 Credit risk
Credit risk is the risk that a counterparty will not meet its obligations under financial instrument or customer contract,
leading to a financial loss.
The group is exposed to credit risk from its operating activities (primarily from trade receivables) and from its financing
activities, including deposits with banks, foreign exchange transaction and other financial instruments.
The company and the group does an extensive and continuous evaluation of credit worthiness of its customers / financial
institutions by assessing external credit ratings (if available) or historical information about default rates and change the
credit limits and payment terms if necessary.
36.1.1 Exposure to credit risk
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at
the reporting date was:
Group
Carrying amount
Available for sale financial
assets - equity shares
Fair value through profit and
loss - unit trust
Trade & other receivables
Amount due from related parties
Cash at bank
Company
31.03.2014
Rs.’000
31.03.2013
Rs.’000
31.03.2014
Rs.’000
31.03.2013
Rs.’000
22
762,806
809,499
762,806
809,499
22
24
25
703,552
1,880,664
19,694
146,071
3,512,787
403,053
1,616,911
21,188
1,281,258
4,131,909
503,552
951,562
24,868
80,939
2,323,727
403,053
693,859
41,566
1,143,575
3,091,552
36.1.2 Trade receivables
The management assesses the credit quality of the customer, taking into account its financial position, past experience and
other factors. Sources of credit risks are identified, assessed and monitored and the company has policies to manage the
risks with in various subcategories. The utilization of credit limits is regularly monitored.
Maximum exposure to credit risk for trade receivables at the reporting date by category wise are as follows:
Group
Public Sector
Private Sector
Individual customers
Corporate customers
Dealers & distributors
Leasing companies
146 United Motors Lanka PLC | Annual Report 2013/14
Company
31.03.2014
Rs.’000
31.03.2013
Rs.’000
31.03.2014
Rs.’000
31.03.2013
Rs.’000
169,433
159,559
169,433
159,559
7,571
78,140
448,461
382,794
1,086,399
104,185
22,843
543,549
296,368
1,126,504
6,536
74,478
98,186
80,645
429,278
103,350
22,843
71,533
68,250
425,535
36.1.3 Impairment losses
(a)
Details of the impairment of trade receivables are given below.
Group
31.03.2014
Individual impairment
Not past due
Past due
Collective Impairment
Not past due
Past due
31.03.2013
Gross
Rs.’000
Impairment
Rs.’000
Gross
Rs.’000
Impairment
Rs.’000
476,927
18,579
16,002
721,318
21,872
21,872
545,462
137,252
1,178,220
2,383
73,436
91,821
340,429
116,498
1,200,117
2,410
49,331
73,613
Company
31.03.2014
Individual Impairment
Not past due
Past due
Collective Impairment
Not past due
Past due
31.03.2013
Gross
Rs.’000
Impairment
Rs.’000
Gross
Rs.’000
Impairment
Rs.’000
295,161
12,716
10,140
296,650
13,784
13,784
126,214
7,837
441,928
177
2,333
12,650
115,854
16,189
442,477
222
2,936
16,942
( b ) The movement in the allowance for impairment in respect of trade receivables during the year was as follows:
Group
As at 1 April
Impairment loss recognised / (reversed)
As at 31 March
Company
2014
Rs.’000
2013
Rs.’000
2014
Rs.’000
2013
Rs.’000
73,613
18,208
91,821
76,111
(2,498)
73,613
16,942
(4,292)
12,650
10,394
6,548
16,942
( c ) Impairment loss of Rs 16 million of the group relates to individually significant customers and impairment
test indicated that they are not expecting to be able to pay their outstanding balances, mainly due to economic
circumstances. Hence the receivable balances are identified as impaired as at 31 March 2014.
Except for the above, balance receivables are impaired collectively based on the collection pattern and historical
default rate.
United Motors Lanka PLC | Annual Report 2013/14 147
Notes to the financial statements contd.
36
Financial instruments contd.
( d ) The group believes that no impairment is necessary for ‘Available for sale financial assets’ as the value changes are
not permanent and significant.
( e ) When the group ascertains that no recovery of the amount owing is possible, at this point the amounts are
considered irrecoverable and are written off against the financial asset directly.
Credit risk relating to cash and cash equivalents
The cash and cash equivalents are held with banks and financial institutions which are rated above ‘BBB-(lka).
36.2 Liquidity risk
Liquidity risk is the risk that the group may not have sufficient liquid financial resources to meet its obligations when they
fall due. The company manages the liquidity risk by carrying out cash flow forecasts and identifying future cash needs.
Investments are planned ensuring money is available for settlements. Adequate banking facilities are approved and kept for
use as and when necessary.
At the reporting date, the group held unit trust investments of Rs 704 million and other liquid assets of Rs 239 million that
are expected to readily generate cash inflows if needed to manage liquidity risk.
The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the
impact of netting agreements.
31 March 2014 - Group
Non- derivative financial liabilities
Finance lease liabilities
Short term loans
Trade and other payables
Bank overdrafts
Carrying
amount
Rs.’000
Contractual
Cash flows
Rs.’000
Less than
6 months
Rs.’000
6- 12
months
Rs.’000
1-2
years
Rs.’000
2-5
years
Rs.’000
More than
5 years
Rs.’000
20,960
1,144,632
1,075,265
192,249
2,433,106
20,960
1,144,632
1,075,265
192,249
2,433,106
4,668
1,144,632
982,875
192,249
2,324,424
4,924
92,390
97,314
8,100
8,100
3,268
3,268
-
Carrying
amount
Rs.’000
Contractual
Cash flows
Rs.’000
Less than
6 months
Rs.’000
6- 12
months
Rs.’000
1-2
years
Rs.’000
2-5
years
Rs.’000
More than
5 years
Rs.’000
28,606
924,243
1,060,996
151,436
2,165,281
28,606
924,243
1,060,996
151,436
2,165,281
4,779
924,243
1,045,586
151,436
2,126,044
4,779
15,410
20,189
9,524
9,524
9524
9,524
-
31 March 2013 - Group
Non- derivative financial liabilities
Finance lease liabilities
Short term loans
Trade & other payables
Bank overdraft
148 United Motors Lanka PLC | Annual Report 2013/14
31 March 2014 - Company
Non- derivative financial liabilities
Short term loans
Trade and other payables
Amounts due to
related parties
Bank overdrafts
Carrying
amount
Rs.’000
Contractual
Cash flows
Rs.’000
Less than
6 months
Rs.’000
6- 12
months
Rs.’000
1-2
years
Rs.’000
2-5
years
Rs.’000
More than
5 years
Rs.’000
100,100
443,083
100,100
443,083
100,100
443,083
-
-
-
-
117,820
141,401
802,404
117,820
141,401
802,404
117,820
141,401
802,404
-
-
-
-
Carrying
amount
Rs.’000
Contractual
Cash flows
Rs.’000
Less than
6 months
Rs.’000
6- 12
months
Rs.’000
1-2
years
Rs.’000
2-5
years
Rs.’000
More than
5 years
Rs.’000
514,068
514,068
514,068
-
-
-
-
50,615
90,869
655,552
50,615
90,869
655,552
50,615
90,869
655,552
-
-
-
-
31 March 2013 - Company
Non- derivative financial liabilities
Trade & other payables
Amounts due to
related parties
Bank overdraft
It is not expected that the cash flows included in the maturity analysis could occur significantly earlier, or at significantly
different amounts.
36.3 Market risk
Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in
market prices. Market risk comprises three types of risks;
Foreign exchange risk
Interest rate risk
Equity price risk
(a)
Foreign exchange risk
Foreign currency risk arises when future commercial transactions are denominated in a currency that is not the entity’s
functional currency. The group’s imports are denominated in foreign currencies. The group is principally exposed to
fluctuations in the value of the Japanese Yen and US dollar against the Sri Lankan Rupee (LKR). The group’s functional
currency is LKR in which most of the transactions are denominated, and all other currencies are considered foreign
currencies for reporting purposes.
Changes in foreign currency exchange rates affect the group’s cost of purchases. Based on anticipated exchange rate
movements forward booking is considered as a method to minimise risk. Early bill settlements and delayed bill settlements
are also used to minimise adverse impact from exchange rate movement.
The group’s exposure to currency risk as at the reporting date are as follows:
Group
USD
Trade payables as at 31 March 2014
Company
JPY
2,173,217
1,941,562
JPY
1,941,562
United Motors Lanka PLC | Annual Report 2013/14 149
Notes to the financial statements contd.
36
Financial instruments contd.
Sensitivity analysis
The following table demonstrates the sensitivity of group profits to a reasonable possible change in the US Dollar and
Japanese yen exchange rate with all other variables held constant.
The impact on the profit before tax due to change in the fair value of monetary assets and liabilities denominated in foreign
currency as at 31 March 2014 are as follows;
Increase/decrease in
exchange rate
Group
effect on profit before tax
Rs.’000
Company
effect on profit before tax
Rs.’000
USD
+5%
(15,491)
-
- 5%
15,491
-
JPY
+5%
(128)
(128)
- 5%
128
128
(b)
Interest rate risk
The group’s interest rate risk arises mainly from the short term borrowings and investment of excess funds in financial
instruments. Borrowings at variable rates expose the group to cash flow interest rate risk which is partially offset by cash/
investments held at variable rates. Borrowings issued at fixed rates expose the group to fair value interest rate risk. The
company has cash and bank balances including deposits placed with government and reputed financial institutions. All
available opportunities are considered before making investment decisions.
The company monitors interest rate risk by actively monitoring the yield curve trends and interest rate movements.
At the end of the reporting period the interest rate profile of the group’s interest bearing financial instruments are as
follows:
Fixed rate instruments
Financial assets
Financial liabilities
Variable rate instruments
Financial assets
Financial liabilities
150 United Motors Lanka PLC | Annual Report 2013/14
Group
2014
Rs.’000
Company
2014
Rs.’000
(121,060)
(121,060)
(100,100)
(100,100)
703,552
(1,236,781)
(533,229)
503,552
(141,401)
262,151
Sensitivity analysis
The following table demonstrates the sensitivity to a reasonable possible change in variable interest, with all other variables
held constant.
Increase/decrease
in basis points
Group
effect on profit
before tax
Rs.’000
+50
(35)
208
-50
35
(208)
31 March 2014 - Variable rate instruments
Company
effect on profit
before tax
Rs.’000
(c)
Equity price risk
Listed equity securities are susceptible to equity price risk arising from uncertainties of future values of the investment
securities. The company manages the equity price risk through diversification of its portfolio to different business
segments.
The company’s equity risk management policies adopted by the Investment Committee are as follows;
Equity investment decisions are based on fundamentals rather than on speculation.
Decisions are made based on in-depth industry and macroeconomic analysis as well as on research reports on the
company performance.
The table below shows the diversification of equity investments;
31.03.2014
Sector
Banks, finance and insurance
Diversified holdings
Motor
Chemicals & pharmaceuticals
Beverage food & tobacco
Power & energy
Manufacturing
Total
31.03.2013
Rs.’000
%
Rs.’000
%
640,114
36,813
56,378
20,300
5,034
4,167
762,806
83.9
4.8
7.4
2.7
0.7
0.5
100.0
685,660
77,931
39,796
6,112
809,499
84.7
9.6
4.9
0.8
100.0
Sensitivity analysis
Financial assets available - for -sale represents investments in shares of quoted companies. The value of these investments
are subject to the performance of investee company and the factors that effects the status of the stock market.
The following table demonstrates the sensitivity to a reasonably possible change in the market index, with all other variables
held constant, the group and company’s equity due to changes in the fair value of the listed equity securities.
Group / Company
Change in the 31.03.2014 share
price of all companies in which the
company has invested
31 March 2014 - Available for sale
financial assets
Effect on equity
Rs.’000
+ 5%
38,140
- 5%
(38,140)
United Motors Lanka PLC | Annual Report 2013/14 151
Notes to the financial statements contd.
36
Financial instruments contd.
36.4 Operational risk
Operational risk is the risk of direct or indirect loss arising from a wide variety of causes associated with the group’s
processes, personnel, technology and infrastructure, and from external factors other than credit, market and liquidity risks
such as those arising from legal and regulatory requirements and generally accepted standards of corporate behaviour.
Operational risks arise from all of the group’s operations. The group’s objective is to manage operational risk so as to
balance the avoidance of financial losses and damage to the group’s reputation with overall cost effectiveness and to avoid
control procedures that restrict initiative and creativity. The primary responsibility for the development and implementation
of controls to address operational risk is assigned to senior management within each business unit. This responsibility is
supported by the development of overall group standards for the management of operational risk in the following areas:
requirements for appropriate segregation of duties, including the independent authorisation of transactions;
requirements for the reconciliation and monitoring of transactions;
compliance with regulatory and other legal requirements;
documentation of controls and procedures;
requirements for the periodic assessment of operational risks faced, and the adequacy of controls and procedures to
address the risks identified;
requirements for the reporting of operational losses and proposed remedial action;
training and professional development;
ethical and business standards;
risk mitigation, including insurance when this is effective.
Compliance with group standards is supported by a programme of periodic reviews undertaken by Internal Audit. The
results of internal audit reviews are discussed with the management of the business unit to which they relate, with
summaries submitted to the Audit Committee and senior management of the group.
36.5 Capital risk management
The group’s objectives when managing capital are to safeguard the group’s ability to continue as a going concern in order
to provide returns to the shareholders and benefits for other stakeholders and to maintain an optimal capital structure to
reduce the cost of capital. Consistent with others in the industry, capital is monitored on the basis of the gearing ratio.
No changes were made in objectives, policies or processes for managing capital during the years ended 31 March 2013
and 31 March 2014.
The group monitors capital using a gearing ratio, which is net debt divided by equity plus net debt. A net debt includes
interest bearing loans and borrowings, trade and other payables, less cash and cash equivalents.
Note
Interest bearing loans and borrowings
Bank overdraft
Trade and other payable
Less: Cash and short term deposits
Net debt
Equity
Capital and net debt
Gearing ratio
152 United Motors Lanka PLC | Annual Report 2013/14
29
26
32
26
31.03.2014
Rs.’000
31.03.2013
Rs.’000
1,165,592
192,249
1,075,265
(238,629)
2,194,477
8,097,177
10,291,654
0.21
952,849
151,436
1,060,996
(1,373,403)
791,878
7,370,627
8,162,505
0.10
36.6 Fair values
Fair values Vs. carrying amounts
The fair values of financial assets and liabilities, together with the carrying amounts shown in the statement of financial
position, are as follows:
Group
31.03.2014
Carrying
Fair
amount
value
Rs.’000
Rs.’000
Assets carried at fair value
Available for sale financial assets
Fair value through profit or loss
Amounts carried at amortised cost
Loans and receivables
Cash and cash equivalents
Liabilities carried at amortised cost
Finance lease liabilities
Short term loans
Trade and other payables
Bank overdrafts
31.03.2013
Carrying
amount
Rs.’000
Fair
value
Rs.’000
762,806
703,552
1,466,358
762,806
703,552
1,466,358
809,499
403,053
1,212,552
809,499
403,053
1,212,552
1,900,358
238,629
2,138,987
1,900,358
238,629
2,138,987
1,638,099
1,373,403
3,011,502
1,638,099
1,373,403
3,011,502
20,960
1,144,632
1,075,265
192,249
2,433,106
23,314
1,144,632
1,075,265
192,249
2,435,460
28,606
924,243
1,060,996
151,436
2,165,281
33,172
924,243
1,060,996
151,436
2,169,847
Company
31.03.2014
Carrying
Fair
amount
value
Rs.’000
Rs.’000
Assets carried at fair value
Available for sale financial assets
Fair value through profit or loss
Amounts carried at amortised cost
Loans and receivables
Cash and cash equivalents
Liabilities carried at amortised cost
Short term loans
Trade and other payables
Bank overdrafts
31.03.2013
Carrying
amount
Rs.’000
Fair
value
Rs.’000
762,806
503,552
1,266,358
762,806
503,552
1,266,358
809,499
403,053
1,212,552
809,499
403,053
1,212,552
976,430
162,290
1,138,720
976,430
162,290
1,138,720
735,425
1,224,825
1,960,250
735,425
1,224,825
1,960,250
100,100
560,903
141,401
802,404
100,100
560,903
141,401
802,404
564,683
90,869
655,552
564,683
90,869
655,552
United Motors Lanka PLC | Annual Report 2013/14 153
Notes to the financial statements contd.
36
Financial instruments contd.
36.7 Financial assets by fair value hierarchy
Fair value of financial instruments are based on a fair value hierarchy which is defined below.
Level 1
Inputs that are quoted market prices (unadjusted) in active market for identical instruments. The company measures the
fair value of an instrument using active quoted prices or dealer price quotations without any deductions for transaction
cost. Market is regarded as active if quoted prices are readily and regularly available and represent actual and regularly
occurring market transactions and arm’s length basis.
Level 2
Input other than quoted prices included within level one that are observable either directly or indirectly. This category
includes instruments valued using ; quoted market prices in an active markets for similar instruments; quoted prices for
identical or similar instruments in markets that are considered less than active; or valuation techniques in which whole
significant inputs are directly or indirectly observable from market data.
Level 3
The input that are unobservable. This category included all the instruments for which valuation techniques includes
input not based on observable data and the unobservable inputs have a significant effect on the instruments valuation.
This category includes instruments that are valued based on quoted prices for similar instrument’s for which significant
unobservable adjustments or assumptions are required to reflect differences between the instruments.
Available for sale financial assets and financial assets fair valued through profit and loss are valued using level 1 valuation
technique. Carrying value of the other financial assets and liabilities have been considered as a reasonable approximation
to the fair value.
37
Contingent liabilities
37.1 As per the sale and purchase agreement dated 21 February 2011 between United Motors Lanka PLC and Janashakthi
Insurance PLC, the company offered a guarantee that agreed to settle and / or mitigate any liability that may arise on
the company with regard to NDB Bank PLC claim over equipment taken on hire purchase agreement by the lessee of
Orient Financial Services Corporation Ltd.
37.2 Corporate guarantees Issued to subsidiaries and related companies are given below.
Corporate guarantees issued to subsidiaries
Name of Company
Name of Bank
Facility
Limit
Rs.‘000
Commercial Bank of Ceylon PLC
Orient Motor Company Ltd.
Unimo Enterprises Ltd
Overdraft
15,000
Outstanding
as at
31.03.2014
Rs.‘000
Outstanding
as at
31.03.2013
Rs.‘000
14,232
14,193
210,000
-
44,864
25,000
11,236
4,802
Hatton National Bank PLC
Term loan
Sampath Bank PLC
Overdraft
Sampath Bank PLC
Term loan
250,000
218,000
-
Sampath Bank PLC
Term loan
325,000
-
156,264
Commercial Bank of Ceylon PLC
Term loan
150,000
72,975
-
Standard Chartered Bank
Term loan
110,000
-
-
154 United Motors Lanka PLC | Annual Report 2013/14
Corporate guarantees issued to jointly controlled entities
Issued by United Motors Lanka PLC
Name of Company
Name of Bank
Facility
Limit
Rs. ‘000
TVS Auto Motives (Pvt) Ltd
Hatton National Bank PLC
Outstanding
as at
31.03.2014
Rs.‘000
Outstanding
as at
31.03.2013
Rs.‘000
Overdraft
10,000
10,000
10,000
Term loan
50,000
50,000
50,000
Issued by TVS Lanka (Pvt ) Ltd
Name of Company
Name of Bank
Facility
Limit
Rs. ‘000
Hatton National Bank PLC
TVS Auto Motives (Pvt) Ltd
DFCC Vardhana Bank
Commercial Bank of Ceylon PLC
Outstanding
as at
31.03.2014
Rs.‘000
Outstanding
as at
31.03.2013
Rs.‘000
Overdraft
20,000
20,000
20,000
Term loan
130,000
125,000
70,000
Overdraft
20,000
20,000
20,000
Term loan
80,000
20,000
64,000
Overdraft
10,000
10,000
-
Term loan
40,000
40,000
50,000
37.3 Turnover tax assessment
The Department of Revenue - Western Provincial Council, has issued an assessment dated 12 June, 2009 assessing the
company Rs 24,667,771 for turnover tax for the quarter ended 30 September 2008.
The Company appealed against this assessment and it was referred to the Provincial Commissioner of Revenue of the
Western Province.
The Provincial Commissioner of Revenue of the Western Province upheld the assessment. The company referred the matter
to the Board of Review of the Western Provincial Council.
The Board of Review of the Western Provincial Council after deliberation upheld the decision of the Provincial
Commissioner of Revenue of the Western Province by its letter dated 11 April 2012.
Company has appealed against the determination of the Board of Review of the Western Provincial Council to Court of
Appeal. Currently the matter is heard in court.
We have sought the advice of tax experts and according to their judgment there is a strong possibility that the court of
appeal will rule in favour of the company.
Therefore no provision has been made for this amount.
38
Related party disclosures
The company carries out transaction in the ordinary course of business with parties who are defined as related parties in
Sri Lanka Accounting Standard 24 (LKAS) “Related Party Disclosures”, the details of which are reported below. The pricing
applicable to such transactions is based on the assessment of risk and pricing model of the company and is comparable
with what is applied to transactions between the company and it’s unrelated customers.
38.1 Parent and ultimate controlling party
The company does not have an identifiable parent of its own.
United Motors Lanka PLC | Annual Report 2013/14 155
Notes to the financial statements contd.
38
Related party disclosures contd.
38.2 Transaction with Key Management Personnel (KMP)
According to Sri Lanka Accounting Standard, LKAS 24 “Related Party Disclosures” , Key Management Personnel (KMP) are
those having authority and responsibility for planning, directing and controlling the activities of the entity. Accordingly, the
Directors of the company and the senior management of the company have been classified as KMP of the company.
As the company is the ultimate parent of its subsidiaries listed out in note 20, and the Board of Directors of the company
have the authority and responsibility for planning, directing and controlling the activities of subsidiaries, the Directors of
the company and the common Directors of the joint venture and the senior management of the group entities have been
identified as the KMP of the group.
The officers who are Directors only of the subsidiaries and jointly controlled entities and are not of the company have been
classified as KMP of the respective subsidiaries or jointly controlled entities only.
38.2.1 Compensation to KMP
Group
Short term employment benefits
Company
2014
Rs. ‘000
2013
Rs. ‘000
2014
Rs. ‘000
2013
Rs. ‘000
147,380
147,380
169,877
169,877
117,513
117,513
126,540
126,540
In addition to their salaries / fees, the company provides non cash benefits to KMP. The company also contributes to a post
employment defined benefit plan on behalf of the KMP.
38.3 Transactions with subsidiaries and jointly controlled entities
Company
Transaction Type
UML Property Development Ltd
(UMPDL)
Rentals paid for premises occupied
Dividend received (gross)
Orient Motor Company Ltd
Sale of motor vehicles
Sale of lubricant
Repairs & services provided
Interest paid
Dividend received (gross)
Expenses incurred
Hiring rental paid on vehicles
Rentals received for premises occupied
Loans granted
Loan settlements
156 United Motors Lanka PLC | Annual Report 2013/14
2013 / 2014
Rs. ‘000
2012 / 2013
Rs. ‘000
69,574
54,000
63,249
52,000
72,061
412
64,611
9,613
3,574
23,977
69,337
3,676
1,084,000
1,084,000
50,755
26,089
9,480
13,649
53,141
1,397
366,000
-
Company
Transaction Type
2013 / 2014
Rs. ‘000
2012 / 2013
Rs. ‘000
314,329
3,266
89,989
18
4,815
62,304
348
9,557
20,000
956,000
956,000
37,400
2,814
185,989
2,140
4,390
76,490
8,202
48,942
985
7,858
130,000
785,000
175,800
Unimo Enterprises Ltd
Purchase of motor vehicles
Purchase of spare parts
Purchase of tyres
Sale of motor vehicles
Repairs & services provided
Interest paid
Interest received
Expenses incurred
Hiring income received
Rentals received for premises occupied
Loans obtained
Loans granted
Loan settlements
Dividend received (gross)
TVS Lanka (Pvt) Ltd
Purchase of motor vehicles (motor bikes)
Repairs & services provided
Repairs & services obtained
Interest received
Expenses incurred
Rentals received for premises occupied
Dividend received
1,619
355
496
16
1,804
650
1,750
1,881
358
1,752
2,363
92,750
TVS Automotives (Pvt) Ltd
Repairs & services provided
Interest received
Expenses incurred
Rentals received for premises occupied
Loans obtained
Loan settlements
21
797
1,558
1,536
9,000
9,000
175
620
1,477
1,397
-
TVS Auto Parts (Pvt) Ltd
Expenses incurred
29
25
2013 / 2014
Rs. ‘000
2012 / 2013
Rs. ‘000
49
48
16,071
14,039
8,258
814
225,000
225,000
2,197
8,161
7,198
6,303
1,308
180,000
-
38.4 Transactions between subsidiaries / jointly controlled entities
38.4.1 Unimo Enterprises Ltd
Company
Transaction Type
UML Agencies & Distributors (Pvt) Ltd
Expenses incurred
Orient Motor Company Ltd
Sale of motor vehicles
Expenses incurred
Vehicle hiring paid
Interest received
Rentals received for premises occupied
Loans granted
Loan settlements
United Motors Lanka PLC | Annual Report 2013/14 157
Notes to the financial statements contd.
38
Related party disclosures contd.
38.4 Transactions between subsidiaries / jointly controlled entities contd.
Company
Transaction Type
2013 / 2014
Rs. ‘000
2012 / 2013
Rs. ‘000
TVS Lanka (Pvt) Ltd
Purchase of three-wheelers / motor bikes
Repairs & services obtained
843
147
-
TVS Automotives (Pvt) Ltd
Expenses incurred
124
85
TVS Auto Parts (Pvt) Ltd
Sale of motor vehicles
-
1,862
2013 / 2014
Rs. ‘000
2012 / 2013
Rs. ‘000
454
-
97
97
2013 / 2014
Rs. ‘000
2012 / 2013
Rs. ‘000
38.4.2 Orient Motor Company Ltd
Company
Transaction Type
TVS Lanka (Pvt) Ltd
Purchase of motor vehicles (motor bikes)
UML Property Development Ltd
Expenses incurred
38.4.3 TVS Lanka (Pvt) Ltd
Company
Transaction Type
TVS Automotives (Pvt) Ltd
Sale of motor vehicles
Purchase of tyres
Purchase of lubricants
Repairs & services provided
Interest received
Expenses incurred
Vehicle hiring income received
Loans granted
Loan settlements
1,218
23,373
39
19,090
805
873
9,000
9,000
1,548
11,052
48
874
42,900
11,700
TVS Auto Parts (Pvt) Ltd
Loans granted
Loan settlements
Interest received
Expenses incurred
Dividend received (gross)
31,000
2,150
2,217
805
2,197
20,000
23,704
95
144
-
38.5 Transactions with other related entities
Company
Name of Director
Position
Transaction Type
2013 / 2014
Rs. ‘000
Readywear Industries (Pvt) Ltd
Ms A. H. Fernando
Director
Repairs & services provided
813
Watawala Plantations PLC
Mr Sunil G. Wijesinha
Chairman
Repairs & services provided
2,713
R I L Property (Pvt) Ltd
Ms A. H. Fernando
Director
Sale of motor vehicles
5,555
158 United Motors Lanka PLC | Annual Report 2013/14
39
Consolidation
The consolidated financial statements of the company’s and its subsidiaries where shareholding as at 31 March 2014 are
in the proportions indicated below.
Subsidiary
Ownership interest
Unimo Enterprises Ltd
UML Property Development Ltd.
Orient Motor Company Ltd.
UML Agencies & Distributors (Pvt) Ltd
Jointly controlled entity
TVS Lanka (Pvt) Ltd
2013/2014
2012/2013
100%
100%
100%
100%
100%
100%
100%
100%
50%
50%
Analysis of consolidated profit after income tax expense
Group
2014
Rs. ‘000
Parent company
Subsidiaries
Jointly controlled entities (on the proportionate consolidation basis)
Inter-company elimination
Consolidated profit after tax expenses
40
1,482,765
206,989
16,183
1,705,937
(100,649)
1,605,288
2013
Rs. ‘000
1,886,762
443,279
(620)
2,329,421
(321,978)
2,007,443
Events occurring after the reporting period
Dividends on ordinary shares
After satisfying the solvency test, in accordance with Section 57 of the Companies Act, No.07 of 2007, the Board of
Directors recommended a final dividend of Rs 6.00 per share for the year ended 31 March 2014 amounting to
Rs 403,602,504 which is to be approved at the forth coming Annual General Meeting. In accordance with LKAS 10 - “Events
after the reporting period” this dividend was not recognised as a liability as at 31 March 2014.
Employee Share Trust
UML Employee Share Trust was established in 1993 with the intention of providing additional benefits to employees
on retirement/resignation. As per the amended Listing Rules of Colombo Stock Exchange section 5.6.10(a), the Board of
Directors decided to distribute the Trust property among all eligible employees and to wind up the Share Trust within 3
years from 1 March 2012.
The company completed the transfer of 119,082 shares (the shares already notionally allocated to the beneficiaries under
the Trust) among 125 employees in the month of March 2014. In the month of April 2014,under phase 2 - the unallocated
738,553 shares and the dividend income of Rs 16.54M were distributed among 465 employees.
Subsequent to the reporting date, no circumstance have arisen, which would require adjustments to or disclosures in the
financial statements, other than those disclosed above.
United Motors Lanka PLC | Annual Report 2013/14 159
Notes to the financial statements contd.
41
Comparative information
The comparative information is re-classified wherever necessary to conform with the current year’s classification in order to
provide a better presentation.
42
Directors responsibility
The Board of Directors is responsible for the preparation and presentation of these financial statements.
43
Operating segment
The group has the following operating segments that engages in business activities which offers different product and
services and are managed separately by the group’s management and internal reporting structure.
In Rs.’000
Lubricants &
Spare parts
2013 /
2012 /
2014
2013
Revenue
External - sales
- Services/commission
Total revenue
Segment results
Unallocated income
Unallocated expenses
Profit from operations before
finance cost
Net finance cost
Profit from operations
Income tax expenses
Profit from ordinary activities
Net change in fair value of
Available for sale
financial assets
Employee benefit plan
actuarial (loss) / gains
2,051,138
2,051,138
476,100
Vehicles
2013 /
2012 /
2014
2013
1,563,430 8,959,185 13,427,685
- 1,347,160 1,468,622
1,563,430 10,306,345 14,896,307
261,661 1,715,573 2,663,076
Repairs & Services
2013 /
2012 /
2014
2013
473,023
473,023
238,238
327,860
327,860
110,896
Tyres
2013 /
2012 /
2014
2013
356,211
356,211
33,624
397,796
397,796
26,036
other services
2013 /
2012 /
2014
2013
702,399
1,281
703,680
24,512
589,981 12,068,933 15,978,892
1,206 1,821,464 1,797,688
591,187 13,890,397 17,776,580
24,540 2,488,047 3,086,209
53,006
86,382
(533,179) (474,768)
Non controlling interests
Net profit attributable to equity
holders of the company
Segment assets
Unallocated assets
Total assets
1,136,997
729,012
5,942,534
5,086,770
187,182
288,797
306,345
272,525
525,487
1,136,997
729,012
5,942,534
5,086,770
187,182
288,797
306,345
272,525
525,487
147,333
58,900
662,484
662,484
22,167
19,854
19,854
11,339
11,339
18,239
58,900
7,864
7,864
22,167
147,333
363,284
363,284
Segment capital
expenditure - allocated
128,900
11,192
647,686
185,873
29,726
14,889
22,386
Depreciation &
amortisation - allocated
19,753
4,411
99,252
73,259
4,555
5,868
Non cash expenses/(income)
17,439
9,645
16,071
28,530
(458)
561
Segment liabilities
Unallocated liabilities
Total liabilities
160 United Motors Lanka PLC | Annual Report 2013/14
Group
2013 /
2012 /
2014
2013
2,007,874
172,397
2,180,271
(574,983)
1,605,288
2,697,823
15,216
2,713,039
(705,596)
2,007,443
(2,686)
156,901
(3,739)
(6,425)
1,598,863
2,158
(14,613)
142,288
2,149,731
5,429
1,601,021
2,155,160
319,914 8,098,545 6,697,018
- 2,766,218 3,408,102
319,914 10,864,763 10,105,120
18,239
79,913
79,913
556,574
2,208,290
2,764,864
834,803
1,894,810
2,729,613
5,486
44,222
8,153
872,920
225,593
3,430
2,162
6,777
3,213
133,767
88,913
2,036
(1,523)
19,058
5,025
54,146
42,238
Share information
1.
Stock exchange listing
The issued ordinary shares of United Motors Lanka PLC, were listed with the Colombo Stock Exchange on 05 December
1989.
The Stock Exchange code for United Motors Lanka PLC is “UML”. Details of trading activities are published in most of the
daily newspapers, generally under the above abbreviation.
2.
Analysis of shareholders
a)
Resident /Non resident as at 31 March 2014
Resident
Range of
No. of
shareholdings
share
(No. of shares)
holders
Up to 1,000 shares
No. of
shares
Non -Resident
% of
No. of
total
share
holding
holders
Total
% of
No. of
total
share
No. of
total
holdings
holders
shares
holding
No. of
shares
% of
2,388
782,474
2.72
27
15,506
0.04
2,415
797,980
1.19
935
2,698,136
9.37
22
80,468
0.21
957
2,778,604
4.13
1,001 - 10,000
10,001 - 100,000
97
2,514,464
8.73
10
221,539
0.58
107
2,736,003
4.07
100,001 - 1,000,000
15
4,457,071
15.48
2
230,700
0.60
17
4,687,771
6.97
1,000,001 - & Over
Total
3
18,334,542
63.70
2
37,932,184
98.57
5
56,266,726
83.64
3,438
28,786,687
100.00
63
38,480,397
100.00
3,501
67,267,084
100.00
(There were 3,579 resident shareholders and 68 non resident shareholders as at 31st March 2013)
b)
Individuals/Institutions
31 March 2014
No. of
shareholders
Individual
Total holdings
3,347
53,253,601
Institutions
154
14,013,483
Grand Total
3,501
67,267,084
c)
31 March 2013
% of total
holdings
79.17
No. of
shareholders
Total holdings
% of total
holdings
3,476
42,339,065
62.94
20.83
171
24,928,019
37.06
100.00
3,647
67,267,084
100.00
Public shareholding
31.03.2014
Public Shareholding
Percentage
31.03.2013
31.03.2012
18,154,758
20,166,672
20,251,962
26.99
29.98
30.11
United Motors Lanka PLC | Annual Report 2013/14 161
Share information contd.
3.
Share trading
2013/14
2012/13
2011/12
Market
Number of transactions
Number of shares traded
1,473,729
1,601,463
3,751,201
9,790,011,926
9,067,929,398
20,464,958,685
195,507
189,717
439,267
243
239
240
2,750
5,628
9,193
21,951,785
5,170,568
8,565,800
2,557
439.4
1,336
227
236
237
Value of shares traded (Rs. Mn)
Market days
Company
Number of transactions
Number of shares traded
Value of shares traded (Rs. Mn)
Market days
4.
Market capitalization and market prices
a)
Market capitalization
Ordinary shares
in issue
(Mn)
Year
UML market
capitalisation
Rs.(Mn)
CSE market
capitalization
Rs.(Bn)
As a % of CSE
market
Market
capitalization
rank
2013/2014
67.26
8,273.85
2,498.0
0.33
58
2012/2013
67.26
6,457.64
2,205.1
0.29
64
2011/2012
67.26
7,264.84
2,012.9
0.36
60
b)
Market prices
2013/2014
Highest (Rs.)
Lowest (Rs.)
Year End (Rs.)
5.
2012/2013
2011/2012
130.00
108.00
189.90
(31.01.2014)
(02.04.2012)
(18.04.2011)
95.50
64.60
108.00
(02.04.2013)
(27.07.2012)
(30.03.2012)
123.00
96.00
108.00
Dividends
2013/2014
Rs.
2012/2013
Rs.
2011/2012
Rs.
1st Interim dividend
3.00
3.00
2nd Interim dividend
3.00
3.00
Final dividend paid
Final dividend recommended
Total
162 United Motors Lanka PLC | Annual Report 2013/14
3.00
4.00
6.00
6.00
-
-
12.00
10.00
9.00
6.
Value creation for shareholders
2013/2014
2012/2013
Change %
Net asset value per share (Rs.)
98.82
89.94
9.87
Earnings per share (Rs.)
22.04
28.05
(21.43)
123.00
96.00
28.13
5.58
3.42
63.16
Market price per share - year end (Rs.)
Price earning ratio (times)
Return on equity(%) - After Tax
22.31
31.18
(28.45)
Dividend pay out
58.98
32.09
83.80
7.
Twenty largest shareholders
31 March 2014
Shareholder
No. of shares
Mr. M.A. Yaseen
31 March 2013
% of total
shareholding
% of total
shareholding
No. of shares
34,640,756
51.50
18,056,256
26.84
Mrs. R.R. Yaseen
7,178,140
10.67
10,576,140
15.72
Readywear Industries Limited
6,526,088
9.70
17,712,588
26.33
Mrs. S. M Chrysostom
4,630,314
6.88
4,630,314
6.88
Mitsubishi Motors Corporation
3,291,428
4.89
3,291,428
4.89
Mr. C. Yatawara
765,714
1.14
753,234
1.12
Jacey Trust Services (Private) Ltd
758,516
1.13
899,252
1.34
Janashakthi Insurance PLC (Share Holders)
464,000
0.69
464,000
0.69
Employees Trust Fund Board
408,100
0.61
408,100
0.61
Capital Development & Investment Company PLC –
A/C No. 2
402,806
0.60
224,546
0.33
NDB Aviva Wealth Management Ltd,
S/A Hatton National Bank PLC
279,762
0.42
-
-
Deutsche Bank AG as Trustee to Candor Sharia Fund
200,000
0.30
-
-
Deutsche Bank AG as Trustee to Candor Growth Fund
170,000
0.25
-
-
Mrs. S.T. Xavier
168,780
0.25
213,784
0.32
Waldock Mackenzie Ltd / Hi -Line Trading (Pvt) Ltd
166,366
0.25
120,700
0.18
Bank of Ceylon A/C, Eagle Growth Fund
163,450
0.24
-
-
Mr. S.D. Yaseen
162,200
0.24
162,200
0.24
Mrs. J.D. De Silva Sugathapala
144,251
0.21
204,251
0.30
Deutsche Bank AG Singapore Branch
119,700
0.18
104,800
0.16
HSBC INTL NOM Ltd-BP2S Singapore-BNP Paribas
Bank and Trust
111,000
0.17
262,180
0.39
2,518,180
3.74
60,601,953
90.08
*Others (Shareholders under 20 largest shareholders
as at 31 March 2013)
Total
60,751,371
90.32
*Comparative shareholding as at 31March 2013 of the twenty largest shareholders as at 31 March 2014.Please refer 7.1 for details
United Motors Lanka PLC | Annual Report 2013/14 163
Share information contd.
7.
Twenty largest shareholders contd.
7.1
Shareholders included in the twenty largest shareholding as at 31 March 2013
Shareholding as at 31st March 2013
% of total
shareholding
No. of Shares
Mrs. L.EM. Yaseen
2,000,000
2.97
Associated Electrical Corporation Ltd
230,380
0.34
Mr. T.L.M. Imtiaz
168,100
0.25
Bank of Ceylon No. 1 Account
Total
8.
119,700
0.18
2,518,180
3.74
Director’s shareholding
Name of Directors
Mr. Sunil G. Wijesinha
Mr. C. Yatawara
Mr. A. W. Atukorala
Mr. A. C. M. Lafir
No. of shares
as at 01 April
2013
Movement
during the
year
% of total
holdings
No. of shares
as at 31 March
2014
% of total
holdings
-
-
-
-
-
753,234
1.12
12,480
765,714
1.14
1,200
Less than 0.01
1,200
Less than 0.01
-
-
-
-
-
Mr. R. H. Yaseen
-
-
-
-
-
Mrs. A. H. Fernando
-
-
-
-
-
Mr. M. Sawada
-
-
-
-
-
164 United Motors Lanka PLC | Annual Report 2013/14
Ten year summary - group
(in Rs.’000)
Reported as per
For the year ended
31 March
Turnover
SLFRS / LKAS
SLAS
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
13,890,397
17,776,580
20,816,341
10,935,116
5,829,410
7,280,837
8,395,149
6,745,137
4,716,833
3,439,587
Profit before taxation
Income tax
Profit for the year
2,180,271
(574,983)
1,605,288
2,713,039
(705,596)
2,007,443
3,193,694
(911,162)
2,282,532
1,374,720
(473,178)
901,542
Shareholders’ funds
Stated capital
Capital reserve
Revenue reserves
Shareholders funds
336,335
1,223,276
6,537,566
8,097,177
336,335
1,223,276
5,811,016
7,370,627
336,335
1,218,974
4,261,260
5,816,569
336,335
1,218,974
2,422,654
3,977,963
336,335
1,244,755
1,588,827
3,169,917
336,335
408,908
1,477,478
2,222,721
336,335
408,908
1,695,326
2,440,569
336,335
408,908
1,278,075
2,023,318
294,294
450,950
925,070
1,670,314
294,294
399,087
706,927
1,400,308
2,722
8,099,899
4,880
7,375,507
10,900
5,827,469
9,615
3,987,578
8,325
3,178,242
7,367
2,230,088
96,797
2,537,366
105,142
2,128,460
94,869
1,765,183
4,662
1,404,970
6,895,105
2,546,658
4,348,447
6,433,543
2,535,611
3,897,932
7,818,347
4,497,424
3,320,923
4,034,184
2,105,844
1,928,340
3,820,047
2,674,371
1,145,676
4,619,698
4,041,418
578,280
4,432,527
4,012,950
419,577
3,450,938
3,117,485
333,453
2,457,803
2,282,246
175,557
1,956,791
1,942,912
13,879
2,947,358
59,964
22,489
2,211,284
59,964
26,252
2,131,516
29,744
2,049,552
20,970
1,991,921
1,184,823
1,238,067
1,306,542
1,326,327
1,470,805
24,391
17,456
15,435
15,435
15,435
15,435
762,806
112,162
64,879
3,969,658
1,212,552
100,025
61,500
3,671,577
366,757
83,110
50,923
2,662,050
74,827
31,124
2,176,473
253,745
31
74,232
122,886
2,467,206
1,371,104
31
62,628
2,636,041
2,032,917
31
51,911
3,338,362
1,984,233
31
3,306,241
1,540,876
31
2,882,669
970,301
31
2,456,572
(218,206)
8,099,899
(194,002)
7,375,507
(155,504)
5,827,469
(117,235)
3,987,578
(434,640)
3,178,242
(984,234) (1,220,572) (1,511,234) (1,266,043) (1,065,481)
2,230,087
2,537,367
2,128,460
1,792,183
1,404,970
Non controlling
interests
Assets employed
Current assets
Current liabilities
Working capital
Property, plant &
equipment
Investment property
Intangible assets
Net Lease rental
receivable
Other investments
Defined benefit plan
Deferred tax assets
Non-current
liabilities
Net assets
Profitability
Earnings per
share (Rs.)
Net assets per share
at year end (Rs.)
Return on average
Net assets (%)
Dividends
Dividends (Rs.’000)
Dividend rate
per share
Dividend cover (Times covered)
134,041
12,249
146,290
(7,726)
(74,706)
(82,432)
848,507
(328,824)
519,683
700,652
(271,882)
428,770
433,089
(140,758)
292,331
217,136
(68,295)
148,841
23.90
29.92
33.91
13.34
2.16
(2.48)
15.70
12.44
8.59
5.03
120.37
109.57
86.47
59.14
47.25
66.31
74.44
63.28
53.29
47.58
19.82
27.22
39.16
22.61
4.60
(3.69)
20.48
20.14
16.56
10.60
874,471
605,404
420,419
60,540
33,634
134,534
100,900
92,492
58,859
73,573
13.00
9.00
6.25
1.80
1.00
4.00
3.00
2.75
2.00
2.50
1.84
3.32
5.43
14.89
4.35
-
5.15
4.63
4.96
2.02
123.00
5.15
96.00
3.21
108.00
3.18
152.2
11.41
90.00
41.66
33.50
(13.51)
53.75
3.42
80.00
6.43
80.00
9.31
51.75
10.29
(21.86)
(14.60)
90.36
87.59
(19.93)
(13.27)
24.46
43.00
37.13
2.58
2.71
2.54
1.74
1.92
1.43
1.14
1.10
1.11
1.08
1.01
Other
Market price per
share (Rs)
Price earnings ratio
Annual sales
growth (%)
Current ratio times
United Motors Lanka PLC | Annual Report 2013/14 165
Investor information
Year
Shares
at the
beginning
1990/1991
10,000,000
1991/1992
1992/1993
1993/1994
Issued during
the year(no’s)
Stated capital
(Rs)
-
100,000,000
23.75
100,000,000
53.00
100,902,660
35.00
2,036,300
122,177,960
60.00
10,000,000
Issued through Share
Trust Scheme to
Employees
10,000,000
90,266
Issued through Share
Trust Scheme to employees
10,090,266
91,230
Bonus issue 1:5
Market value
per share
(Rs)
1994/1995
12,217,796
-
122,177,960
27.50
1995/1996
12,217,796
-
122,177,960
31.50
12,217,796
53,319
147,146,750
32.00
1996/1997
Issued through Share
Trust Scheme to employees
Bonus issue 1:5
2,443,560
1997/1998
14,714,675
147,146,750
41.50
1998/1999
14,714,675
147,146,750
32.50
1999/2000
14,714,675
147,146,750
31.25
2000/2001
14,714,675
147,146,750
28.00
147,146,750
32.00
294,293,500
31.00
2001/2002
2002/2003
14,714,675
Bonus issue 1:1
14,714,675
14,714,675
2003/2004
29,429,350
294,293,500
28.00
2004/2005
29,429,350
294,293,500
51.75
2005/2006
29,429,350
294,293,500
80.00
2006/2007
336,335,420
80.00
2007/2008
33,633,542
336,335,420
53.75
2008/2009
33,633,542
336,335,420
33.50
2009/2010
33,633,542
336,335,420
90.00
336,335,420
152.20
2010/2011
Bonus issue 1:7
Subdivision of shares – two shares
for every existing ordinary shares
29,429,350
33,633,542
4,204,192
33,633,542
2011/2012
67,267,084
336,335,420
108.00
2012/2013
67,267,084
336,335,420
96.00
2013/2014
67,267,084
336,335,420
123.00
166 United Motors Lanka PLC | Annual Report 2013/14
Glossary of financial terms
Accounting policies
Deferred taxation
Financial Instrument
The specific principles, bases,
conventions, rules and practices
adopted by an entity in preparing and
presenting Financial Statements.
Sum set aside for income tax in
the Financial Statements that may
become payable/receivable in a
financial year other than the current
financial year.
A financial instrument is any contract
that gives rise to both a financial asset
in one entity and a financial liability or
equity instrument in another entity.
Accrual basis
Financial asset
Recognizing the effects of transactions
and other events when they occur
without waiting for receipt or payment
of cash or its equivalent.
Depreciation
Actuarial gains and losses
Dividend cover
Is the effect of difference between
the previous actuarial assumptions
and what has actually occurred and
the effects of changes in actuarial
assumptions.
Profit after tax divided by gross
dividends. This ratio measures the
number of times dividend is covered
by the current years’ distributable
profits.
Amortisation
Dividend payout
The systematic allocation of the
depreciable amount of an asset over
its useful life.
Dividend per share as a percentage of
the earnings per share.
The systematic allocation of the
depreciable amount as an asset over
its useful life.
Any asset that is cash, an equity
instrument of another entity or a
contractual right to receive cash or
another financial asset from another
entity.
Financial liability
Any liability that is a contractual
obligation to deliver cash or another
financial asset to another entity.
Gearing
Held to maturity
Dividend yield
Available for sale financial assets
Available for sale financial assets are
those non derivative financial assets
that are designated as available for
sale or are not classified as loans
and receivables, held to maturity
investments or financial assets at fair
value through profit or loss.
Capital reserves
Reserves identified for specific
purposes and considered not available
for distribution.
Contingencies
Conditions or situations at the
reporting date, the financial effect of
which are to be determined by the
future events which may or may not
occur.
Current ratio
Current assets divided by current
liabilities.
Current service cost
Is the increase in the present value of
the defined benefit obligation resulting
from employee service in the current
period.
Proportion of total interest bearing
borrowings to capital employed.
Dividend earned per share as a
percentage of its market value.
Debt assets acquired by the entity
with positive intention to be held to
maturity.
Earnings per ordinary share
Impairment
Profit attributable to ordinary
shareholders divided by the number of
ordinary shares in issue.
This occurs when recoverable amount
of an asset is less than its carrying
amount.
Effective tax rate
Interest cover
Provision for taxation excluding
deferred tax divided by the profit
before taxation.
A ratio showing the number of times
interest charges is covered by earnings
before interest and tax.
Fair value
Key management personnel
The amount for which an asset could
be exchanged or a liability settled,
between knowledgeable, willing parties
in an arm’s length transaction.
Key management personnel are
those persons having authority and
responsibility for planning, directing
and controlling the activities of the
entity, directly or indirectly.
Fair value through profit and loss
A financial asset/liability acquired/
incurred principally for the purpose
of selling or repurchasing it in the
near term, part of a portfolio of
identified financial instruments that
are managed together and for which
there is evidence of a recent actual
pattern of short-term profit taking,
or a derivative (except for a derivative
that is a financial guarantee contract)
Liquid assets
Assets that are held in cash or in a
form that can be converted to cash
readily, such as deposits with other
banks, Bills of Exchange and Treasury
Bills & Bonds.
United Motors Lanka PLC | Annual Report 2013/14 167
Glossary of financial terms contd.
Market capitalisation
Unit trust
Number of ordinary shares in issue
multiplied by the market value of a
share as at a date.
An undertaking formed to invest in
securities under the terms of trust
deed.
Materiality
Value addition
The relative significance of a
transaction or an event, the omission
or misstatement of which could
influence the economic decisions of
users of Financial Statements.
The quantum of wealth generated by
the activities of the group measured
as the difference between turnover
and the cost of materials and services
bought in.
Net asset value per share
Working capital
Shareholders’ funds divided by the
number of ordinary shares in issue.
Capital required to finance day-to-day
operations computed as the excess of
current assets over current liabilities.
Non-controlling interest
Interest of individual shareholders, in
a company more than 50% of which is
owned by a holding company.
Price earnings ratio
Market price of a share divided by
earnings per share as reported at that
date.
Related parties
Parties where one party has the
ability to control the other party or
exercise significant influence over
the other party in making financial
and operating decisions, directly or
indirectly.
Retirement benefit-present value
of defined benefit obligation
Is the present value of expected
future payments required to settle the
obligation resulting from employee
service in the current and prior
periods.
Subsidiary
An entity, including an unincorporated
entity such as a partnership, which is
controlled by another entity (known as
the Parent).
168 United Motors Lanka PLC | Annual Report 2013/14
Notice of meeting
Notice is hereby given that the Twenty
Fifth Annual General Meeting of
United Motors Lanka PLC will be held
on Friday, 27 June 2014 at 10.30 a.m.
at the UML Showroom, at No. 100,
Hyde Park Corner, Colombo 2, for the
following purposes;
08.
To re-appoint the retiring
Auditors M/s KPMG, Chartered
Accountants, to hold office until
the conclusion of the next
Annual General Meeting and to
authorise the Directors to fix
their remuneration.
01.
09.
To authorize the Board of
Directors to determine and
make donations for 2014/2015.
10.
To consider any other business
of which due notice has been
given.
02.
03.
04.
05.
To receive and consider the
Audited Financial Statements for
the year ended 31 March 2014
together with the Reports of the
Directors and Auditors thereon.
To re-elect Mr. Sunil G. Wijesinha
as a Director of the Company
in terms of Article 89 of the
Articles of Association of the
Company.
To re-elect Mrs. A. H. Fernando,
as a Director of the Company
in terms of Article 89 of the
Articles of Association of the
Company.
To re-elect Mr. M. Sawada, as
a Director of the Company
in terms of Article 89 of the
Articles of Association of the
Company.
To re-elect Mr. Eardley Perera,
as a Director of the Company
in terms of Article 89 of the
Articles of Association of the
Company.
06.
To re-elect Mr. A.W. Atukorala,
Director, who retires by rotation
in terms of Article 83 of the
Articles of Association of the
Company.
07.
To declare a final dividend
of Rs. 6.00 per share for the
year ended 31 March 2014 as
recommended by the Directors.
By Order of the Board
Mrs. R. M. Hisham
Company Secretary
Colombo
29 May 2014
Notes
Any member of the Company
who is entitled to attend and
vote at this meeting may
appoint a proxy to attend and
vote instead of him/her.
To be valid the completed form
of proxy must be deposited
at the Registered Office of the
Company situated at No. 100,
Hyde Park Corner, Colombo 2
not less than forty eight (48)
hours before the appointed hour
of the meeting.
A proxy need not be a member
of the Company.
A form of proxy is enclosed in
this Report.
United Motors Lanka PLC | Annual Report 2013/14 169
Notes
170 United Motors Lanka PLC | Annual Report 2013/14
Proxy form
I/We ..............................................................................................................................................................................................
of
..................................................................................................................................................................................../
being a member/members of United Motors Lanka PLC, hereby appoint ...............................................................................
...........................................................of ......................................................................................................... whom failing
1)
2)
3)
4)
5)
6)
7)
Sunil Gamini Wijesinha
Chanaka Yatawara
Ananda Wijetilake Atukorala
Aashiq Carder Mohamed Lafir
Ramesh Hiran Yaseen
Ladduwa Kovisge Anne Hiroshini Fernando
Atulligamage Damian Eardley Ignatius Perera
of
of
of
of
of
of
of
Colombo
Colombo
Colombo
Colombo
Colombo
Colombo
Colombo
or
or
or
or
or
or
failing
failing
failing
failing
failing
failing
him
him
him
him
him
her
as my/our proxy to represent me/us and* ................................................ to vote on my/ our behalf at the Twenty Fifth
Annual General Meeting of the Company to be held on 27th June 2014 at 10.30 a.m. at the UML Showroom, at No. 100,
Hyde Park Corner, Colombo 2, and at any adjournment thereof and at every poll which may be taken in consequence of the
above said meeting. I/We the undersigned hereby authorize my/our Proxy to vote on my/our behalf in accordance with the
preference indicated below:-
For
1.
To receive and consider the Annual Report of the Board of Directors, the Audited
Balance Sheet and Accounts of the Company for the year ended 31 March 2014 and
Report of the Auditors thereon.
2.
(i)
To re-elect Mr. Sunil G. Wijesinha as a Director of the Company
(ii)
To re-elect Mrs. A. H. Fernando, as a Director of the Company.
(iii)
To re-elect Mr. M. Sawada, as a Director of the Company.
(iv)
To re-elect Mr. Eardley Perera, as a Director of the Company
(v)
To re-elect Mr. A.W. Atukorala, as a Director of the Company.
3.
To declare a final dividend of Rs. 6.00/- per share for the year ended
31 March, 2014
4.
To re-appoint the retiring Auditors M/s KPMG, Chartered Accountants, to hold
office until the conclusion of the next Annual General Meeting and to authorize the
Directors to determine their remuneration
5.
To authorize the Directors to determine donations for 2014/2015
Against
Signed on this ............................ day of ............................... Two Thousand and Fourteen
........................................
Signature/s
*If you wish your Proxy to speak at the meeting you should insert the words “to speak and” in the place indicated and initial such insertion.
Notes:
Please indicate with an “x” in the space provided how your Proxy is to vote. If there is in the view of the Proxyholder doubt
(by reason of the way in which the instructions contained in the proxy have been completed) as to the way in which the
Proxyholder should vote, the Proxyholder shall vote as he thinks fit.
Instructions as to completion appear overleaf
United Motors Lanka PLC | Annual Report 2013/14 171
Proxy form contd.
Instructions as to completion
1.
Kindly perfect the form of proxy, after filling in legibly your full name
and address, and sign in the space provided. Please fill in the date of
signature.
2.
If you wish to appoint any person other than Directors as your proxy,
please insert the relevant details in the space provided overleaf.
3.
In terms of Article 66 of the Articles of Association of the Company.
(i)
in the case of an individual shall be signed by the Appointer or his
Attorney; and
(ii)
in the case of a company or a corporate body shall be either under its
common seal or signed by its Attorneys or by an Officer on behalf of
such entity.
4.
In terms of Article 61 of the Articles of Association of the Company
in the case of joint-holders of a share the senior who tenders the vote,
whether in person or by proxy shall be accepted to the exclusion of
the votes of the other joint-holders and for this purpose seniority shall
be determined by the order in which the names stand in the register
of members in respect of the joint holding.
5.
To be valid the completed form of proxy must be deposited at the
registered office of the company situated at No. 100, Hyde Park
Corner, Colombo 2 not less than forty eight (48) hours before the
appointed hour of the meeting.
172 United Motors Lanka PLC | Annual Report 2013/14
Corporate Information
Name of Company
Board of Directors
United Motors Lanka PLC
Chairman
Mr. Sunil G. Wijesinha
Legal Form
A Public Limited Liability Company
incorporated in Sri Lanka on 9 May
1989.
Chief Executive Officer/Executive
Director
Mr. C. Yatawara
Listed with the Colombo Stock
Exchange
Directors
Mr. A. W. Atukorala
Mr. A. C. M. Lafir
Mr. R. H. Yaseen
Mrs. A. H. Fernando
Mr. M. Sawada
on 5 December 1989
Company Registration Number
PQ -74
Registered Office
100, Hyde Park Corner, Colombo 02
Secretary
Mrs. R.M. Hisham
Head Office
Audit Committee
P.O. Box 697
100, Hyde Park Corner, Colombo 02
Tel: 4797200, 2448112
Fax: 2448113
www.unitedmotors.lk
Chairperson
Mrs. A.H. Fernando
Auditors
Remuneration Committee
KPMG
32A, Sir Mohammed Macan Markar
Mawatha,
Colombo 3.
Chairman
Mr. Sunil G. Wijesinha
Registrars
Nomination Committee
P. W. Corporate Secretarial (Pvt) Ltd,
3/17, Kynsey Road, Colombo 08.
Tel: 4640360/3 – Fax 4740588
Chairman
Mr. Sunil G. Wijesinha
Bankers
Bank of Ceylon
Commercial Bank PLC
Hatton National Bank PLC
National Development Bank PLC
People’s Bank
Sampath Bank PLC
Standard Chartered Bank
The Hongkong & Shanghai Banking
Corporation Limited
Nations Trust Bank PLC
Pan Asia Bank PLC
DFCC Vardhana Bank
Seylan Bank PLC
Mr. Sunil G. Wijesinha
Mr. A.W. Atukorala
Mr. A.W. Atukorala
Mr. A.W. Atukorala
Mr. C. Yatawara
Mrs. A.H. Fernando
United Motors PLC - 100, Hyde Park Corner, Colombo 02, Sri Lanka. www.unitedmotors.lk