South Korea’s first-generation parking industry has begun making drastic changes such as revamping and M&A as it has been suffering from continuous losses. It is looking to becoming an industry that focuses on mixed mobility in order to secure a stable source of profit.
According to the industry, Parking Cloud started carrying out a restructuring last year while AJ Park is currently going through a process of selling its business this year. AJ Networks, which is the largest shareholder of AJ Park, received letters of intention (LOI) from multiple companies such as Humax regarding the sale. AJ Networks is currently negotiating with Humax first regarding the sale. Although Humax already owns a parking company called Hi Parking, it has decided to contact AJ Networks regarding the sale in order to expand its parking business. Its ultimate plan is to create synergy between its parking business and car sharing and electric vehicle charging businesses. It can also internalize a smart parking settlement solution technology once the acquisition goes through.
AJ Networks will look at other companies besides Humax if a gap between the asking price and the selling price is too high. In the past, AJ Networks selected VIG Partners as the preferred bidder for the sale of AJ Sellcar. However, AJ Sellcar was eventually sold to SDH Holdings.
AJ Networks decided to sell AJ Park after AJ Park recorded a loss in 2019 and the industry’s conditions had become worse last year due to COVID-19. However, AJ Automated Parking Systems which is the parent company of AJ Park has been incorporated as a subsidiary of AJ Networks. AJ Networks plans to make a decision on whether it will sell AJ Automated Parking Systems or not in the future.
AJ Park recorded an operating loss in 2019. Its revenue and operating loss in 2019 were $77 million (86 billion KRW) and $38.7 million (43.2 billion KRW) respectively. Its revenue went down 10.9% compared to 2018 while its operating profit of $12.7 million (14.2 billion KRW) from 2018 turned into operating loss in 2019. Current ratio is not so good either as it stands at 68.5%. Its poor performance from overseas markets also contributed to its overall performance.
Situations had become worse last year due to COVID-19. As people tried to stay away from public transportations, number of people visiting supermarkets, hospitals, schools, airports, and tourist spots had gone down while usage rate of parking lots around offices had gone up. Due to reduced usage rate of parking lots, demands for its new automated systems had plummeted.
Also, as AJ Group removed mobility subsidiaries while it was going through a business reshuffle, AJ Park lost subsidiaries within the group to create synergy with. AJ Networks sold AJ Rentacar, AJ Capital, and AJ Sellcar and liquidated Linkable.
“AJ Networks decided to sell AJ Park due to intense competitions, poor performance, and lack of subsidiaries that AJ Park can create synergy with.” said one official from the parking industry. “The best solution for AJ Networks is to link its parking lot service to other mobility services as parking lot service is still drawing interests from the mobility market.”
Parking Cloud had gone through a restructuring at the end of last year and is currently reorganizing its group due to the size of its loss. Size of its operating loss had become bigger from $5 million (5.6 billion KRW) in 2016 to $8.7 million (9.7 billion KRW) in 2019. Its profitability had worsened as it had carried out many new business projects.
Its restructuring focused on making the group smaller and strengthening its sales capacity. It reduced number of employees from 500 to 150 and focused on expanding area of its parking lots as it believes that bigger lots will make it easier to pursue new businesses and expand partnerships. The company plans to pursue strong partnerships with other mobility services in the future.
An official for Parking Cloud said that the company plans to focus on strengthening its business capabilities and improving profitability for a while.
Staff Reporter Park, Jinhyeong | jin@etnews.com