- Profit structure upgrade effects were confirmed as the greater part of the profits came from future growing businesses
- One-time losses resulting from a deteriorated trading environment and closed-down businesses are reflected in 4Q
… Significant as a reinforced foundation for sustained growth by eliminating future uncertainties
- “To take a new leap into the next decade through expedited growth of home care + mobility”
It was through company performance that SK networks delivered a successful demonstration of its profit structure focusing on future growing businesses.
SK networks announced on February 6th, 2020 through its provisional performance disclosure that it recorded annual sales of KRW 13.54 trillion (3.2% year-on-year increase) and operating income of KRW 109.3 billion (18.1% year-on-year decrease) in 2019 based on consolidated financial statements.
An SK networks executive emphasized that, “A greater part of the profits, far above 60% of the whole business, came from home care (SK magic) and mobility (SK rent-a-car, and others), two important business areas that will lead the company’s future development.”
Profits from the home care and mobility businesses increased from 21% in 2017 to 31% in 2018 until last year when the share soared to a 61% increase, almost double the year before. Analytics shows that these businesses have firmly established their position as the two major growth-poles for SK networks.
Despite decreased demand for mobile devices in general, the ICT business is also acknowledged to have maintained around KRW 80 billion profits through business reinforcement efforts including diversification of ICT device distribution and AI-based used phone ATM service launching.
However, 4Q operating income and net income were influenced by one-time factors including valuation losses for unredeemed receivables from Mideast businesses due to a deteriorated global trading environment and equity value losses as the company decided to withdraw from the coal mining business in Australia.
This, on the other hand, is more significant in that future uncertainties were completely eliminated by having the possibility for potentially increasing losses proactively reflected in financial statements; thus, providing a solid foundation on which sustained growth can be achieved.
In fact, the company’s operating income last year reached KRW 200 billion when year-end’s one-time losses are excluded. Furthermore, the consumer goods business represented by SK magic and SK rent-a-car showed a remarkable growth under a continued strategic investment.
SK magic launched several green home appliances in 2019 including all-in-one water purifier, and motion air purifier, among others that are competitive in terms of technology and design. Also in the last 4Q, SK magic launched a pottery bubble bidet and 3D massage chair with massage balls, one after another, which contributed to rental account expansion and helped the company achieve 1.8 million accounts, twice the number at the end of 2016 when the business was taken over.
Since AJ rent-a-car was taken over in January last year, the rent-a-car business celebrated 210,000 vehicles in operation this year. This achievement was the result of utilizing strengths from both companies to integrate short-term inland rent-a-car services, engage in active marketing for the personal long-term rent-a-car service, etc. Furthermore, starting SK rent-a-car as a joint corporation in 2020 is expected to bring about cost reduction from increased vehicle purchase/sales volume, business efficiency through integrated maintenance/insurance operations, etc.
SK networks plans to finalize its business portfolio realignment by selling off its direct gas station operations, stabilize its financial structure and continue to nurture growing businesses focusing on home care and mobility.
The company will match each business unit with suitable digital technologies to further strive to resolve issues raised by customers and achieve business model evolution. Also, efforts will be made to identify models that create social value in terms of management strategy and business nature. SK magic’s successful landing in the Malaysian market will be part of continued investments for sustained growth beyond Korea and in overseas.
“We are fully ready to grow and take a leap as we took the courage to remove potentially unstable factors that may negatively influence the company performance at the end of last year,” said a SK networks executive who added, “2020 will be the first year, opening the coming decade, for us as a customer-oriented digital company. We will strive to generate performances that will satisfy our stakeholders’ expectations so as to keep our customers, investors, society and all the members happy.”
