Luolai Life Technology Co., Ltd. (hereinafter referred to as "Luolai Life") is playing the role of "not bad money".

On September 29, Luolai Life announced that the company used 45 million yuan of raised funds to purchase the Nanjing Bank’ s capital-guaranteed floating-income wealth management product on September 27. The estimated annualized rate of return is 1.65% to 3.60%, and the value date is the expiry dates are September 30, 2021 and January 6, 2022.

According to Luolai Life, the main reason why the company uses idle raised funds for cash management is to "improve the efficiency of the use of raised funds, reduce financial expenses, and reduce operating costs." Prior to this, the company’ s board of directors had passed a resolution, agreeing to use no more than 160 million yuan of idle raised funds to purchase bank-guaranteed wealth management products.

In fact, the original investment destination of the idle raised funds of Luolai Life is the fundraising project-the supply chain system optimization construction project (hereinafter referred to as the "supply chain project") and the omni-channel home life O2O operation system construction project (hereinafter referred to as the "full channel projects"). In the end, the implementation period of the supply chain project has been postponed to March 1, 2023, and the omnichannel project has been terminated.

It is worth noting that with the unsuccessful progress of fund-raising projects, the remaining 210 million yuan of surplus funds from omni-channel projects will permanently supplement working capital; and the temporarily idle 165 million yuan of funds raised by supply chain projects are deposited into a structured deposit account. Used to purchase the above-mentioned bank-guaranteed wealth management products, etc.

In response to related issues, the reporter called and wrote to Luolai' s life several times. The relevant person in charge of the company said: "The company is holding a business analysis meeting, and the reply needs to be confirmed by the secretary of the board." As of press time, the reporter has not received any further reply.

The decline in gross profit margin forces the transformation

Relevant information shows that Luolai Life focuses on the home textile business focusing on bedding, and continues to explore the home scene mode of "everyone spinning small home". According to the company' s 2021 semi-annual report, according to the certification issued by the China Chamber of Commerce and the All-China Business Information Center in 2021, the comprehensive market share of Luolai bedding products has ranked first in the industry for 16 consecutive years (2005-2020).

Financial report data shows that Luolai Life’ s main business income reached 2.52 billion yuan in the first half of this year, an increase of 32.54% year-on-year. Due to the increase in operating income, operating costs also increased by nearly 34%. Among them, sales expenses and administrative expenses rose by 17.87% and 7.98% respectively, reaching 514 million yuan and 175 million yuan respectively.

In addition, the amount of cash flow generated by Luolai Life' s operating activities is also showing a downward trend. The company' s 2021 semi-annual report data shows that the net cash flow generated by Luolai Life' s operating activities in the first half of this year was 110 million yuan, a decrease of 37.24% from the same period last year. In response, Luolai Life responded that it was mainly due to the increase in taxes and fees paid in the current period.

It is worth noting that despite the substantial increase in revenue by 30%, the gross profit margin of Luolai Life’ s traditional business has declined. Specifically, among the three major product categories of Luolai Life, in addition to the furniture business in the United States, the gross profit margins of the standard suites and quilts, which account for the larger main business income, were 49.33% and 48.14%, respectively, compared with the same period last year, decrease by 1.15% and 0.82%.

Luolai Life is also accelerating the comprehensive transition to digitalization. According to the 2020 annual report, the company will comprehensively carry out digital construction in retail channels, supply chains, and marketing.

According to the information of the intelligent construction service provider of Luolai Life, the smart factory project previously deployed by Luolai Life has been checked and accepted at the beginning of this year. This project can provide an overall solution for Luolai Life, including equipment production status monitoring, real-time statistics of order output, order dispatch plan, piece counting statistics, etc.

In addition, investing in related technology companies is also one of the actions of Luolai Life' s digital transformation. Relevant information shows that Luolai Life has invested in two technology companies, Medica Technology and Taihuoiao Technology. Among them, the former is committed to providing non-wearable physiological parameter detection technology and smart sleep scene solutions, and has cooperated with manufacturers such as Huawei and LG; the latter is to provide manufacturing companies and brands with industrial, product, and structural design, and enterprises with value-added services.

The progress of fundraising projects is blocked

Although Luolai Life has performed well in terms of performance and strategic layout, there are hidden worries in the previous fundraising project planning. In the 2020 annual report, Luolai Life disclosed that in 2016, two committed investment projects with a total of 730 million yuan in refinancing, supply chain projects and omni-channel projects, have undergone major changes. In the end, the implementation period of the supply chain project has been postponed to March 1, 2023, and the omnichannel project has been terminated.

It is understood that according to the original plan, the Luolai Life Supply Chain Project has raised 250 million yuan in funds, and plans to build a fully automated three-dimensional library in Nantong. Optimize and upgrade to enhance the operation and management level of the company' s supply chain system, improve the management and service capabilities of retail terminals, and provide support for the company's transformation into a one-stop brand retailer of home life and the construction of an omni-channel home life O2O operating system".

According to previous media reports, the project received funding in January 2018. According to the original plan, the project should be completed in January this year, but by April this year, the investment progress of the project was only 30.43%. According to the Special Report on the Storage and Use of Raised Funds for the First Half of 2021 released by Luolai Life, the current investment progress of the project is 42.24%, which is still not more than 50%.

It is worth mentioning that in August this year, Luolai Life announced that it will use 250 million yuan in Nantong to build a new Luolai Smart Industrial Park in the Economic Development Zone of Nantong City, Jiangsu Province. The source of construction funds is self-raised. Among them, the project covers a total area of about 800 acres, and it is planned to build about 200,000 square meters, including product exhibition halls, production workshops, logistics and storage, office, intelligent and other supporting facilities. It is planned to start construction on October 1 this year.

At the same time, the company' s previously deployed omni-channel projects have been directly terminated. According to the original plan, the project raised 480 million yuan, but due to insufficient funds, it was adjusted to about 205 million yuan. In 2019, Luolai Life disclosed that the investment of the project was 2.1036 million yuan, and the progress was 1.45%.

After that, in April 2020, Luolai Life issued an announcement stating that the company' s board of directors agreed to the company' s termination of the implementation of the omni-channel project, and to permanently supplement the remaining uninvested funds to the company's working capital, and the omni-channel project was terminated.

Regarding the slow progress of the project construction, Luolai Life said: "During the actual implementation of the project, the market environment and consumption habits have undergone major changes. Consumers have relatively low acceptance of the offline full-category home furnishing pavilion model. The full-category home living halls that have been opened in the early stage failed to achieve the desired benefits in actual operations. Therefore, based on prudent considerations, the company's early investment in this project has been slow."

"Based on the current economic situation and based on the principle of steady development, the company plans to no longer open large-scale direct-operated stores of all-category home life museums in the short term. Therefore, in order to improve the efficiency of the use of raised funds and create greater value for the company and shareholders, the company intends to terminate the implementation of omni-channel projects to ensure the effective use of raised funds." Luolai Life further explained.

Regarding the use of remaining idle funds, Luolai Life said: "As of June 30, 2021, the company will deposit temporarily idle raised funds into a structured deposit account with a balance of 135 million yuan for management, which is safe for investment. Investment products with good liquidity and capital preservation commitment to increase the company' s income."