Golfzon, Young Golfers' 'Second Prime' Through Screens

More than 20 years ago, the five-day workweek was introduced, increasing leisure time. The leisure and travel industries have grown rapidly. Last year, the number of companies adopting remote work increased due to the impact of COVID-19. Even with the introduction of flexible work arrangements including remote work, productivity did not decline, and voices demanding the adoption of a ‘four-day workweek’ are growing. The MZ generation (Millennials + Generation Z), who value ‘work-life balance’ (WLB), actively supports the introduction of a four-day workweek. This is a concern for companies seeking to attract talented personnel.

Demand for enjoying leisure activities is increasing. Until just a few years ago, golf was classified as a premium sport, but it has entered the path of popularization. In 2019, the number of golf course users reached 38.96 million, a 7.8% increase compared to the previous year. Considering last year’s golf fever, it is highly likely that this upward trend continued. Asia Economy aims to gauge growth potential through an analysis of the business and financial structure of Golfzon, the leading company in screen golf market share, and Namhwa Industry’s business division operating Muan Country Club.

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[Asia Economy Reporter Park So-yeon] Golfzon, the number one company in screen golf market share, has soared in performance thanks to the increased number of golfers due to COVID-19. While many companies struggled last year due to COVID-19, Golfzon’s net profit and operating profit increased explosively. This is interpreted as the effect of COVID-19 acting as a catalyst, accelerating the influx of young golfers. Golfzon is attracting attention in the golden age of the golf-related market as it owns and operates offline golf courses through its holding company, in addition to screen golf.

Golfzon was established in March 2015 by spinning off the screen golf and maintenance business division from Golfzon Newdin Holdings. It provides golf simulator equipment and related software to domestic and overseas screen golf rooms and indoor golf practice ranges. Golfzon’s core revenue sources are divided into sales from golf simulator equipment and fees collected per round on golf simulators.

◆ COVID-19 + Increase in Golf Population ‘Second Golden Age’ = Golfzon recorded consolidated sales of 298.5 billion KRW last year, a 20.8% increase compared to the same period the previous year. Operating profit increased by about 60%, from 32.3 billion KRW to 51.6 billion KRW during the same period. Net profit rose approximately 131%, from 16.2 billion KRW to 37.5 billion KRW. As of 2020, sales composition was 119.1 billion KRW (39.9%) from non-franchise business, 126.9 billion KRW (42.5%) from franchise business, 26.2 billion KRW (8.8%) from overseas, and 26.3 billion KRW (8.8%) from other businesses.

Contrary to market predictions that Golfzon would suffer due to social distancing in the early stages of COVID-19 spread because of the enclosed nature of screen golf rooms, the company posted significantly improved results. Golfers who could not travel overseas for golf due to COVID-19 visited, and new customers flowed in, steadily improving performance. The securities industry analyzes that screen golf rooms have benefited from COVID-19 as they limit contacts to acquaintances or family, unlike movie theaters or gyms where consumption occurs among unspecified many.

Golfzon operates overseas subsidiaries and runs global directly managed stores in Japan, the United States, China, and Vietnam. Domestically, the screen golf franchise ‘Golfzon Park’ has surpassed 1,500 stores. Since starting the franchise business in August 2016, it reached 1,000 stores in May 2019 and surpassed 1,500 stores last month. The securities industry estimates that 100 new stores opened in the first quarter of this year alone. Golfzon Park has about 600 locations in the metropolitan area.

The expansion of new golfers playing screen golf and the increase in new franchise stores have led to sales growth. Yoon Hyuk-jin, a researcher at SK Securities, said, “Although the domestic franchise market is experiencing difficulties due to economic downturn, screen golf is profitable and demand is increasing not only in the metropolitan area but also in provincial areas, marking a second golden age. Even if normal outdoor leisure activities become possible next year, golfers familiar with screen golf will act as a safety net for performance.”

◆ Challenge of New Businesses Based on Stable Financial Structure = Golfzon’s total assets increased by about 17.50%, from 312.6 billion KRW at the end of 2019 to 367.3 billion KRW at the end of 2020. Among these, cash and cash equivalents increased by about 46.67%, from 16 billion KRW to 23.5 billion KRW. During the same period, total liabilities increased by about 25.93%, from 112.5 billion KRW to 141.7 billion KRW. Current liabilities increased by 32.45%, and non-current liabilities increased by 18.19%. The increase in lease liabilities was identified as a major factor. The debt ratio stands at 62.83%. Due to improvements in profitability and increases in cash and cash equivalents, the current ratio rose by 12.1 percentage points from 133.8% to 145.9%. Total equity increased by about 12.76%, from 200 billion KRW to 225.6 billion KRW, mainly due to an increase in retained earnings.

Based on this, Golfzon is expected to expand new businesses. Last month, through a resolution at the regular shareholders’ meeting, Golfzon added healthcare and medical device manufacturing to its business purposes. Specifically, this includes manufacturing and sales of healthcare devices, manufacturing and sales of medical devices, manufacturing of household electrical appliances, and management of prepaid electronic payment methods and issuance.

According to the 2020 business report, Golfzon’s shareholding structure consists of Golfzon Newdin Holdings with 20.28%, KB Asset Management with 17.29%, Kim Won-il with 16.10%, Kim Young-chan with 14.99%, and other minority shareholders holding 31.34%. Among these, KB Asset Management sold 129,145 shares (2.05%) of its holdings on the 24th of last month. As a result, KB Asset Management’s stake changed from 16.64% to 14.49%.

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Meanwhile, Golfzon Newdin Holdings, the holding company of Golfzon, operates 17 golf courses nationwide through its subsidiary Golfzon County, owning 11 of them. Last year, Golfzon Newdin Holdings recorded consolidated sales of 293 billion KRW, operating profit of 31 billion KRW, and net profit of 29.4 billion KRW. Sales increased by 28% compared to the previous year, and operating profit and net profit turned positive. The sale of Anseong Q Golf Course, held by Golfzon County Asset Management, a subsidiary, led to significant performance improvement. Anseong Q was sold in the fourth quarter of last year for 140.5 billion KRW to the Eisen Investment consortium, approximately 7.8 billion KRW per hole. Although Golfzon County Asset Management’s stake was not high, it reportedly recovered 26 billion KRW from this sale. The investment principal was around 13 billion KRW. Golfzon County, which operates golf courses, recorded sales of 217.3 billion KRW and operating profit of 62 billion KRW last year, increasing by 60.4% and 62.5% respectively compared to the previous year.

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