United Motors moving into property development

United Motors Limited (UMLL) is embarking on property development in strategic locations following a profit growth of 46.7 percent.

“The remarkable profit growth in the UMLL Group recording Rs. 428.8 million was due to the exceptional performance of the parent company UMLL, which achieved a profit after tax of Rs.405.2 million which is an increase of 63.8 percent over the previous year. The net contribution by subsidiaries to Group profits however declined by 47.6 percent from the previous year due to losses incurred in the first half of the financial year by Unimo Enterprises Ltd. and the sharp decline in gross margins in TVS Lanka (Pvt) Ltd. mainly due to the currency depreciation,” R. M. S. Fernando, Chairman UMLL has said in his annual statement for the 2006-07 year.

He has explained that the contribution from group companies was disproportionate to the resources invested, particularly the senior management time spent on them. “The board is resolved to take some hard decisions on the business carried out by the subsidiaries during the ensuing year,” he has said, adding that while the core business of vehicle sales has done remarkably well during the past few years, it may not be so in the years to come. “As such, the diversification of our revenue sources should receive the highest priority during the current financial year. The Group is rich in land as an asset at strategic locations. The first of our property development projects will be launched early in the current financial year. Other related projects are also under active consideration by the management and Board,” he has explained. Whilst the flagship business will continue to receive the management’s attention, the launch of several other projects in the areas mentioned above will help reduce the over dependence on a single source of revenue and profit, Fernando noted.

He has said that 94.5 percent of Group profits came from the parent company while the five subsidiaries and the jointly controlled entity contributed only Rs.23.6 million. “The net margin achieved by all subsidiaries and joint ventures was only 0.9 percent of turnover while the return on funds invested in them was only 6.8 percent,” he has stated.