Modetour Network, a domestic mid-sized travel agency, has begun the transition to the second generation of management.
The founder of Modetour Network, Woo Jong-woong (78), announced that his eldest son, Woo Jun-yul (48), has been promoted to president as of the 1st of last month. President Woo plans to lead Modetour Network's growth by enhancing digital transformation (DX) and strengthening its main business of package products, focusing on personalized travel services based on data.
However, just a month after President Woo's inauguration, Modetour Network has seen its management grade downgraded from 'outstanding companies' to 'venture companies' in the KOSDAQ market, raising concerns about its financial soundness. Increasing President Woo's low equity stake (0.2%) in Modetour Network, which controls major affiliates, is also viewed as a challenge for succession.
◇President Woo Jun-yul's inauguration, actual power still with 'father Woo Jong-woong'
Modetour Network, founded by Woo Jong-woong in 1989, mainly provides travel arrangement services for both domestic and international customers. In addition, it also engages in accommodation services and real estate investment.
As of December last year, Modetour Network has 12 unlisted companies as affiliates, including Modetour International and Cruise International. Most of these companies are related to the travel and travel arrangement sectors.
Modetour Network was the first in the country to engage in 'wholesale sales' and grew by securing agencies to provide services indirectly instead of selling travel products directly to consumers.
Modetour Network officially announced the promotion of Woo Jun-yul, the son of Chairman Woo, to president on the 1st of last month. With President Woo taking the helm of company management after 23 years in the company, Modetour Network has initiated its second-generation management.
President Woo began his career at Cruise International in 2002 and moved to Modetour Network in 2010, diving into the practical side of the travel industry. Since then, he has solidified his position within the group, serving as head of strategic planning, head of management support, general director, and vice president.
However, some in the market believe it is still difficult to view this as a 'complete second-generation management.' President Woo's equity in Modetour Network is only 0.2%, while Chairman Woo remains the largest shareholder with 10.92%, which indicates that the real decision-making power still lies with Chairman Woo.
A representative of Modetour Network noted, 'Even after President Woo Jun-yul's inauguration, Chairman Woo Jong-woong comes to work every day and is still actively involved in operations. While President Woo is actively engaging in overall management, there are currently no plans for Chairman Woo to step back from management.'
In fact, Chairman Woo has maintained his position as an inside director even after 36 years since the establishment of Modetour Network. Moreover, internal discussions regarding equity inheritance have not yet taken place, indicating that Chairman Woo's influence remains significant. Woo Jun-sang (45), Chairman Woo's younger son and president of Cruise International, also holds 0.16% equity in Modetour Network.
◇Strengthening financial soundness, improving performance are challenges
The challenges facing Modetour Network as it fully transitions to second-generation management are strengthening financial soundness and improving performance. The company has recently been effectively downgraded from the outstanding companies division of KOSDAQ to the venture companies division, and its operating profit is expected to drop 58% compared to the previous year in 2024, indicating instability in management indicators.
The Korea Exchange's KOSDAQ Market Headquarters adjusted Modetour Network's corporate sector classification from the outstanding companies division to the venture companies division on the 2nd. The KOSDAQ market headquarters evaluates listed companies annually based on corporate size, financial soundness, technological capability, and management performance, categorizing them into three divisions: outstanding companies, venture companies, and mid-sized companies. Modetour Network was previously in the top-rated outstanding companies division but failed to meet the criteria this year and was moved down to the venture companies division.
The main reason Modetour Network lost its outstanding company status is due to a drop in return on equity (ROE). To maintain its status in the outstanding companies division, the average ROE over the past three years must exceed 5% or the average net profit must exceed 3 billion won, but Modetour Network has not met these criteria.
ROE is a key profitability indicator that shows how much profit corporations made using their equity. A low ROE indicates that capital is not being utilized effectively, which may lead investors to question the financial soundness of the corporations.
A Korea Exchange official stated, 'Modetour Network's net profit in 2022 was sluggish due to the impact of COVID-19, causing the average figure over the past three years to fall short of the criteria. As a result, its classification has been changed to the venture companies division.'
Improving performance is also a critical task. Modetour Network's consolidated revenue for 2024 is expected to be 251.6 billion won, an increase compared to the previous year; however, its operating profit is projected to drop 58% to 4.6 billion won.
The main cause of declining profitability is an increase in bad debt expense. Bad debt expense is expected to reach 5.1 billion won in 2024, which is an increase of approximately 1587% compared to the previous year. This expense reflects the amount treated as a cost for accounts receivable expected to be uncollectible, significantly influenced by the previous year's 'TMON and WeMakePrice settlement issue.'
Excluding one-time expenses, revenue continues to show an upward trend; however, the potential for performance fluctuations due to external factors remains. A securities analyst stated, 'The travel sector itself is growing, but due to its sensitivity to external variables, such as recent airline accidents and domestic economic downturns, performance may deteriorate.'