Redcap Tour, Stable Performance in Q3 Despite COVID-19

Q3 Revenue 56.9 Billion KRW, Operating Profit 6.6 Billion KRW
Improved Profitability in Rent-a-Car Business... Strong Performance Expected in Q4
Travel Sector Overcomes Market Crisis with Proactive Measures

[Asia Economy Reporter Hyungsoo Park] Redcap Tour, which has entered the vehicle subscription service market, recorded an operating profit of over 10 billion KRW in its rental car business in the third quarter of this year.

Redcap Tour announced on the 22nd that it posted consolidated sales of 56.9 billion KRW and an operating profit of 6.6 billion KRW in the third quarter. These figures represent decreases of 8.1% and 4.8%, respectively, compared to the same period last year.

Although losses in the travel business continued due to the impact of the novel coronavirus disease (COVID-19), the rental car business maintained stable performance.

Sales from the rental car business reached 54.8 billion KRW, an 8% increase compared to the same period last year, and operating profit rose 128% to 10.5 billion KRW.

The increase in long-term rental contracts led to higher rental sales, and increased vehicle sales boosted sales revenue. The rise in sales and operational efficiency resulted in a significant increase in operating profit.

For the fourth quarter of this year, the company expects the expiration of long-term rental contracts to increase compared to the same period last year. As the average contract period lengthens, the profit per vehicle sale continues to rise, suggesting ongoing sales growth and profitability improvement.

Additional revenue is also anticipated through the vehicle subscription service ‘Genesis Spectrum,’ which recently launched officially in partnership with Hyundai Motor Group.

Sales in the travel business amounted to 2.1 billion KRW, down 81% from the same period last year. The business recorded an operating loss of 3.9 billion KRW, turning to a deficit. The decline in business trip demand due to COVID-19 has led to continued poor performance.

Recently, the travel market has seen growing expectations for travel bubbles. A travel bubble is an agreement between countries with excellent quarantine measures during the COVID-19 situation to form a safety bubble that allows mutual travel, exempting travelers from the 14-day self-quarantine, which has been a major obstacle to overseas travel. The government is currently negotiating with countries such as China, Vietnam, and Taiwan regarding the timing of travel bubbles. Since this month, a ‘special entry procedure for businesspeople’ between Korea and Japan has been implemented.

Business trip demand limited to charter flight operations is expected to recover earlier than individual travel demand once self-quarantine exemptions are granted. Redcap Tour’s travel business performance is also expected to gradually improve. The business division is focusing all efforts on expanding sales by leveraging its expertise optimized for B2B services and financial stability. The number of ‘business trip airline ticket issuance and ancillary service agency contracts’ signed in the form of annual contracts with client companies is increasing.

Given Redcap Tour’s characteristic of having a high proportion of long-term rentals, the rental car business generates stable profits. The travel business is also concentrating on reducing the scale of losses, so the fourth-quarter performance is expected to be positive.

Redcap Tour achieved cumulative sales of 169.8 billion KRW and an operating profit of 17.4 billion KRW in the third quarter. With a stable financial structure and high service quality, Redcap Tour is expanding its rental car business through entry into the vehicle subscription service market. It is overcoming the market crisis caused by COVID-19 through proactive measures such as strengthening the travel business by expanding charter flight operations and signing more contracts related to business trip services.