In recent years, with the advent of the trend of fine decoration and full decoration to deliver new houses, many home furnishing companies are targeting upstream real estate developers to open up "bulk business" or "engineering customers." Judging from the performance results of several home furnishing companies in 2018, digging upstream customers does help increase operating income, but with it comes a decrease in net cash flow inflows and an increase in the proportion of accounts receivable. Industry insiders said that when home furnishing companies cooperate with real estate developers to enter the hardcover business, they must first understand and adapt to the "payment rhythm" of the real estate industry, otherwise they may affect their main business.
Bulk business brings revenue growth. "Fine decoration" and "full decoration" have become the new trend of housing delivery for commercial housing. In 2018, 31 provinces and cities introduced the "full renovation" policy. According to the "Chinese National Clothing Consumption Behavior and Lifestyle Research Report" jointly released by the Public Opinion Lab of the Chinese Academy of Social Sciences, Ruiyan Household Think Tank and other institutions, currently, 70% of home decoration demand comes from new construction.
Fully furnished homes have allowed home furnishing companies to smell new markets. Including a number of listed home furnishing companies, companies from multiple sub-sectors of building materials furniture began to cut into this piece of cake.
Sofia (002572) 2018 annual report shows that in 2018, its bulk business grew rapidly. Sofia said that the bulk user business sales are the company's business of producing and selling supporting wardrobes for large real estate projects. Among them, the sales of the distributor channel accounted for 88.24%, the sales of the direct franchise store channel accounted for 3.21%, and the bulk business channel accounted for 7.99%. In 2017, its bulk business channel accounted for 4.59%.
Also benefiting from the engineering business is Diou Home Furnishings. In 2018, Diou Home Furnishing completed a major asset reorganization, and Foshan (Real Estate) Oushenuo Ceramics Co., Ltd. (hereinafter referred to as "Oshenuo") has become its holding subsidiary. Prior to the reorganization, Diou Home Furnishing's sanitary ware business was mainly based on the retail channel, and Oushenuo established a tooling self-service service team. With its first-mover advantages such as its comprehensive service capabilities and complete service system accumulated over the years, Country Garden was formed , Vanke, Evergrande, Agile, China Resources Land, Xuhui and other domestic real estate leading enterprises as the main quality customer base. Focusing on the channel advantages of Oushennuo, Diou Home Furnishing stated that it will actively explore the direct business of sanitary engineering and provide new growth points for the company.
Due to the consolidation of the financial data of Oushenuo, Diou Household's operating performance in 2018 increased significantly year-on-year. In 2018, Diou Household's revenue was 4.308 billion yuan, an increase of 707.31% over the same period last year. Net profit attributable to shareholders of listed companies was 382 million yuan, an increase of 601.46% over the same period last year.
Indicators such as cash flow are affected
Judging from the cash flow and assets and liabilities of the two companies, many operating indicators such as cash flow and accounts receivable have changed significantly. Sofia's 2018 annual report shows that its net cash flow from operating activities is about 1.1 billion yuan, a decrease of 11.50% compared to 1.243 billion in 2017. Sophia said that the decrease in the net inflow of cash flow from operating activities was due to the increase in major engineering operations and settlement according to contracts, resulting in an increase in receivables.
In terms of assets and liabilities, the accounts receivable was 407 million yuan, accounting for 5.20% of the total assets, and in 2017, this indicator was 224 million yuan, accounting for 2.03% of the total assets. Sofia said that it was mainly due to an increase in receivables for bulk user business projects at the end of 2018. Corresponding changes are also due to bills receivable. Due to the acceptance of some large customers by acceptance bills, this index was 190 million yuan in 2018, accounting for 2.43% of total assets, while this index was zero in 2017.
Diou Home Furnishing's operating indicators have also undergone similar changes. In 2018, the net cash flow generated by the operating activities of Ossino was 60.661 million yuan, a decrease of 39.75% compared with 2017's 101 million yuan. Diou Home Furnishing said that it was mainly due to the rapid growth of Oshenuo's direct engineering business and the corresponding increase in accounts receivable.
At present, Osgeno's engineering business accounts for nearly 70%. The engineering business has promoted the continued growth of Osnano, but it has also brought a lot of capital requirements. Diou Home stated in its 2018 annual report that in order to support the expansion of Ousino's production capacity and the development of its direct engineering business, after the reorganization is completed, it will provide Ousino with direct financial support and bank financing guarantees to maximize the guarantee The capital requirements for business development have solved the funding bottlenecks encountered in the past during its development.
In 2018, Diou Home Furnishing Co., Ltd. (hereinafter referred to as "Guangxi Oushenuo"), a wholly-owned subsidiary of Oushenuo, has increased its capital twice with its own capital of 300 million yuan. After the capital increase is completed, the registered capital of Guangxi Ou Shennuo will increase from 100 million yuan to 400 million yuan. Ou Shennuo said that the capital increase will enhance Guangxi Ou Shennuo ’s capital strength, improve its asset-liability structure, and strengthen its actual business operation capabilities.
For home furnishing companies, the biggest pain point of cooperating with real estate developers is the flow of funds. A person in charge of a decoration company that once conducted business cooperation with real estate developers said that before entering the engineering business, how to cooperate with home developers and real estate developers, how to distribute profits, and how to grasp their own interests are fundamental issues that need to be considered.