Improved profitability enables 50% dividend from Sathosa Motors

Sathosa Motors Ltd. (SML), the agents for the Isuzu range of vehicles in Sri Lanka, has earned an after tax profit of Rs. 49.3 million in the year ended March 31, 1998, up from Rs. 38.2 million a year earlier, enabling the directors to recommend a 50% dividend to shareholders.

Sathosa's holding company is the Itochu Corporation of Japan, a part of the Itochu Group which holds a minority interest in Isuzu Motors of Japan. Itochu who run a Colombo office owns 60% of SML. Other major shareholders include the Ceybank Unit Trust (8%), Thurston Investments, Central Finance John Keels Holdings and its subsidiary, Waldock Mackenzie and some banks. All these shareholders own less than 10%.

SML Chairman Sumal Perera, has told shareholders that they have succeeded in achieving the turnover and overall profit goals set for themselves and had grown with the economy despite an intensively competitive automobile market. He noted that the profits had contributed to enhance the net worth of the company to Rs. 308 million from its original share capital of Rs. 15 million in 1985.

Perera said that a significant feature in the year under review was the reduction of financial costs from previous years. These had come down to Rs. 2.8 million in 1997/98 from Rs. 14.5 million the previous year. This was mainly possible by taking advantage of new financial instruments and new financial regulations for imports.

The company was able to fund its construction work from equity funds. The new showroom and administrative building costing Rs. 11.2 million had been completed last December drumming up sales. There were no long-term borrowings and hence no risk indicated by a nil gearing ratio.

The year under review saw a total of 405 vehicles sold compared to 307 the previous year. With the move to the new showroom, the sales volume had leaped from an average of 20 vehicles a month to 50. Isuzu is doing well in the plantation sector and claims a 75% market share for lorries and double cab pickups from the estates.

"In the defence sector too we managed to build up the image of SML providing personalised services. As a result SML managed to sell 75 units of Isuzu double cab pickups to the defence sector which is more than 50% of the total annual requirement of the defence sector,'' Perera said.

SML expects to complete the modernisation of its main spare parts outlet begun in March by October. This would enable better and more efficient stock control and improved customer service. Stage 1 of their workshop development at Vauxhall Street is expected to be completed this month.

Stage 2 which covers a new hangar for running repairs, upgrading lubrication and service areas, and a tinkering and painting section is expected to be completed by March next year. Facilities at the Peliyagoda workshop have been enhanced to provide a quick and quality service to customers. Total revenue from repair and services had grown to Rs. 84.5 million from the previous year's Rs. 76.8 million.

During the year, monthly salaries of non-executive staff was increased by Rs. 500 and new salary scales with higher increments granted resulting in an increase of over 100%. The attendance incentive and meal allowance was raised 25% and a bonus of three months salary paid.

The directors of the company are Messrs. S.J.S. Perera (chairman), T. Muroga (managing director), H. Nagashima (chief operating officer), S.P. Jayasuriya (director/general manager), H. Shibayama, Y. Ichimura (alternate to H. Shibayama) and R.D. Abeysekera.