'Operating Surplus' Overcomes KOSDAQ Delisting Crisis... 'Mr. Pizza' MP Group Faces Crucial Turning Point in April

Operating Profit Turned Positive Last Year... "Escaping Delisting Cause if Operating Losses Recorded for 5 Consecutive Years"
Submission of Improvement Plan Implementation Report and Results on 19th... Final Delisting Decision in April

[Asia Economy Reporter Lee Seon-ae] MP Group, which operates 'Mr. Pizza,' is expected to escape from chronic 'operating losses' and avoid the risk of delisting.

According to industry sources on the 17th, MP Group, which has been posting operating losses since 2015, was confirmed to have turned an operating profit last year. Although concerns were widespread due to operating losses until the third quarter of last year, the company made every effort in the fourth quarter to improve its performance. Although the profit margin is not large, the industry considers it a significant achievement as it was accomplished for the first time in five years. It is estimated that sales decreased by about 5% due to restructuring efforts to improve performance.

In 2018, consolidated sales amounted to 119.8 billion KRW, with an operating loss of 400 million KRW. Sales slightly decreased compared to 2017, but the company succeeded in reducing the operating loss by 1.3 billion KRW. MP Group remains tight-lipped about last year's performance, but internally it is said to be encouraged by the turnaround to operating profit. Accordingly, expectations are rising that the company will continue to be seen in the KOSDAQ market.

The Korea Exchange targets companies with five consecutive years of operating losses for delisting. If MP Group's performance last year, which has been in the red for four years since 2015, had not significantly improved, it would have faced additional delisting reasons on top of former Chairman Jung Woo-hyun's embezzlement and breach of trust charges. This means a very high possibility of being expelled from the KOSDAQ market. However, having barely achieved operating profit, it is expected to avoid the delisting reason of 'delisting if operating losses are recorded for five consecutive years.'

MP Group ended the improvement period granted by the Korea Exchange in June last year as of the 10th of this month. Now, by the 19th, it must submit a report on the implementation of the improvement plan and an expert verification report on the results. The KOSDAQ Market Committee, which decides on delisting, is scheduled to be held within three weeks thereafter. Considering that it usually takes about a month for the results to come out, the final decision on delisting will be made in early April.

This time, the outlook is mostly positive. In May last year, the committee decided on delisting once, stating that MP Group's delisting reasons were not resolved due to failure to improve performance. MP Group immediately filed an objection and barely secured an additional eight months of improvement period. Previously, after former Chairman Jung's arrest, the exchange reviewed and resolved MP Group's stock delisting twice, using 1 year and 4 months of the total 2-year improvement period. The given eight months was the last improvement period.

As part of the Store Revitalization Project (SRP), the buffet stores increased to 91, one more than the promised 90, and the company has been steadily launching new products to improve sales, so MP Group is expecting good results. However, since the performance improvement is not at a remarkable level, the company is still holding on to concerns. If delisting is confirmed in April, the glory of being the 'first domestic pizza company listed on KOSDAQ' will end with the unprecedented dishonor of expulsion after 11 years. Since MP Group is a native franchise that led the market revival by introducing Korean-style pizza since opening the first 'Mr. Pizza' store (Ewha branch) in 1990, the impact on the industry is expected to be significant.

MP Group expressed confidence that it has fulfilled everything according to the improvement plan but was cautious about the results. An MP Group official said, "As we are under review, we are doing our best," and refrained from further comments.

MP Group plans to continue the Store Revitalization Project (SRP) steadily. Buffet stores have shown sales growth of 26% to 50%. Some stores have achieved sales increases of over 110%. The company will also actively recruit franchisees. An MP Group official emphasized, "Mr. Pizza, which has grown into a franchise brand with about 270 stores nationwide, will actively recruit franchisees this year to make a leap forward on its 30th anniversary."