TCM A/S : Q2 2022 interim report

TCM Group Management's review

Interim report Q2 2022 (April 1 - June 30)

(All figures in brackets refer to the corresponding period in 2021)

Double-digit revenue growth in the quarter. Earnings temporarily impacted by price increases on raw material. Outlook on EBIT revised.

CEO Torben Paulin:

"In Q2 we delivered a significant revenue growth of 12% through an increase of 11% in the Danish market and a strong growth of 24% in Other countries driven by the Norwegian business.

We are pleased that the supply chain situation normalised during the quarter, and that we through huge efforts from our committed employees were able to meet the strong demand for kitchens in the quarter and deliver significant topline growth. The growth consisted of both volume growth and impact from the implemented sales price increases.

The Russian invasion of Ukraine impacted the overall supply in the European market, which led to significant further price increases on raw material and components as well as higher energy and transportation costs in the quarter. During Q2 we implemented two further sales price increases, however due to the nature of our business, the positive effect from these mitigation actions comes with some delay. Input costs have now stabilised, and from the middle of the third quarter the implemented sales price increases will expectedly level out the negative impact from the higher input costs so far.

On a positive note, the order pipeline going into Q3 is solid, providing some visibility and assurance of the short term customer demand. However, the high inflation combined with increasing interest rates and other macro economic indicators creates a high level of uncertainty regarding the housing market and the future demand for kitch- ens.

We are constantly monitoring the development in customer behaviour and demand, and we have prepared a number of initiatives which can swiftly be put into action to mitigate a slump in demand if necessary. A substantial part of our cost base consists of variable costs, and we therefore have a very flexible setup and can quickly adjust our cost base according to demand thereby protecting our margin and profitability.

Based on the current market conditions, which is subject to a high degree of uncertainty, we revise our financial outlook: a full year revenue guidance in the range DKK 1,150-1,225 million (unchanged), corresponding to organic growth of 4-11%, and an adjusted EBIT in the range DKK 130-160 million (previously DKK 140-170 million)."

TCM Group A/S, Skautrupvej 16, DK-7500 Holstebro, Company reg. (CVR) no: 37291269

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Financial highlights Q2

• Revenue DKK 324.8 million (DKK 290.7 million) corresponding to a revenue growth of 11.7%. Organic like-for-like growth was 11% excluding revenue from third party products (core business).
• Adjusted EBITDA DKK 43.5 million (DKK 47.7 million). Adjusted EBITDA margin was 13.4% (16.4%).
• Adjusted EBIT down DKK 5.0 million to DKK 39.1 million (DKK 44.1 million). Adjusted EBIT margin was 12.0% (15.2%).
• Non-recurringitems had a total positive impact of DKK 3.6 million (negative impact of DKK 1.5 million). Non-recurring items included a technical gain from the final settlement of the Celebert/kitchn.dk transac- tion.
• EBIT up DKK 0.1 million to DKK 42.7 million (DKK 42.6 million), corresponding to an EBIT margin of 13.1% (14.6%).
• Net profit up DKK 0.3 million to DKK 32.2 million (DKK 31.9 million).
• Free cash flow was DKK 26.5 million (DKK 52.2 million).
• Cash conversion ratio was 49.5% (71.5%).

Financial highlights H1 2022

• Revenue DKK 606.2 million (DKK 571.8 million) corresponding to a revenue growth of 6.0%. Organic like-for-like growth was 9%.
• Adjusted EBITDA DKK 73.8 million (DKK 85.4 million). Adjusted EBITDA margin was 12.2% (14.9%).
• Adjusted EBIT down DKK 11.9 million to DKK 65.1 million (DKK 77.0 million). Adjusted EBIT margin was 10.7% (13.5%).
• Non-recurringitems had a negative impact of DKK 1.8 million (DKK 2.8 million).
• EBIT down DKK 10.9 million to DKK 63.3 million (DKK 74.2 million), corresponding to an EBIT margin of 10.4% (13.0%).
• Net profit down DKK 7.8 million to DKK 48.8 million (DKK 56.6 million).
• Free cash flow was DKK -6.4 million (DKK 27.7 million).
• Full-yearguidance for the financial year 2022 is revenue in the range DKK 1,150-1,225 million, and adjusted EBIT in the range DKK 130-160 million.

Contact

For further information, please contact:

CEO Torben Paulin [phone]

CFO Mogens Elbrønd Pedersen [phone]

IR Contact - [e-mail]

TCM Group A/S, Skautrupvej 16, DK-7500 Holstebro, Company reg. (CVR) no: 37291269

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Key figures and ratios

DKK million	Q2 2022	Q2 2021	H1 2022	H1 2021	FY 2021
Income statement
Revenue	324.8	290.7	606.2	571.8	1,108.3
Gross profit	69.3	74.6	129.2	140.6	254.6
Earnings before interest, tax, depreciation and amortisa-
tion (EBITDA)	47.1	46.2	71.9	82.6	155.4
Adjusted EBITDA	43.5	47.7	73.8	85.4	154.7
Earnings before interest, tax and amortisation (EBITA)	42.7	42.6	63.3	75.5	139.7
Adjusted EBIT	39.1	44.1	65.1	77.0	137.8
Operating profit (EBIT)	42.7	42.6	63.3	74.2	138.4
Financial items	(2.7)	(1.8)	(3.4)	(2.0)	(3.3)
Profit before tax	40.1	40.8	61.0	72.2	135.7
Net profit for the period	32.2	31.9	48.8	56.6	110.7
Balance sheet
Total assets	1,006.4	838.9	1,006.4	838.9	907.3
Net working capital (NWC)	(29.4)	(76.3)	(29.4)	(76.3)	(81.6)
Net interest-bearing debt (NIBD)	333.3	152.9	333.3	152.9	199.5
Equity	397.8	418.4	397.8	418.4	419.7
Cash Flow
Free cash flow excl. acquisitions of operations	26.5	52.2	(6.4)	27.7	44.5
Cash conversion, %	49.5%	71.5%	49.5%	71.5%	58.3%
Growth ratios
Revenue growth, %	11.7%	11.7%	6.0%	11.2%	8.2%
Gross profit growth, %	(7.1%)	3.2%	(8.1%)	2.2%	(6.7%)
Adjusted EBIT growth, %	(11.4%)	8.6%	(15.5%)	9.6%	(1.4%)
EBIT growth, %	0.2%	7.6%	(14.7%)	7.2%	2.8%
Net profit growth, %	1.0%	5.8%	(13.7%)	7.3%	8.3%
Margins
Gross margin, %	21.3%	25.7%	21.3%	24.6%	23.0%
Adjusted EBITDA margin, %	13.4%	16.4%	12.2%	14.9%	14.0%
Adjusted EBIT margin, %	12.0%	15.2%	10.7%	13.5%	12.4%
EBIT margin, %	13.1%	14.6%	10.4%	13.0%	12.5%
Other ratios
Solvency ratio, %	39.5%	49.9%	39.5%	49.9%	46.3%
Leverage ratio	2.35	0.90	2.35	0.90	1.33
NWC ratio, %	(2.6%)	(7.0%)	(2.6%)	(7.0%)	(7.4%)
Capex ratio excl. acquisitions, %	1.0%	1.3%	1.4%	2.0%	2.6%
Share information
Number of outstanding shares	9,067,294	9,514,123	9,067,294	9,514,123	9,174,073
Weighted average number of outstanding shares	9,067,294	9,715,213	9,082,524	9,856,820	9,584,933
Number of treasury shares	7,500	485,877	7,500	485,877	825,927
Earnings per share before dilution, DKK	3.55	3.28	5.38	5.74	11.55
Earnings per share after dilution, DKK	3.55	3.28	5.37	5.74	11.54

Reference is made to the consolidated financial statements for 2020 prepared in accordance with IFRS for definitions of key figures and ratios.

TCM Group A/S, Skautrupvej 16, DK-7500 Holstebro, Company reg. (CVR) no: 37291269

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Business review

In Q2 2022 revenue increased by 11.7% to DKK 324.8 million (DKK 290.7 million). The organic like-for-like growth excluding third party revenue (core business) was 11% in the quarter. The revenue growth in the quarter was supported by a higher share of revenue from third party products, and negatively affected by the technical impact from the merge of the e-commerce activities in kitchn.dk and Celebert.

TCM Group's primary market is Denmark which contributed with 89% of Group revenue in Q2 2022. Customer demand in the Danish kitchen market remained solid in the quarter. For TCM Group, revenue in Denmark was up 10.5% (organic like-for-like growth excluding third party revenue (core business) was 9%) driven by growth within our DIY segment (Nettoline and e-commerce) and within Svane Køkkenet.

Revenue outside Denmark increased by 23.5% compared to Q2 2021. The growth was driven by increased sales to the Norwegian market, both organic growth and growth from new stores.

Gross margin decreased from 25.7% in Q2 2021 to 21.3% in Q2 2022. The merge of the e-commerce activities in kitchn.dk and Celebert had a technical negative impact on gross margin of in total 0.6%-point in the quarter. Furthermore, the gross margin was negatively affected by further increased prices on raw material and energy following the Russian invasion of Ukraine. The higher input costs have been mitigated by increased sales price, which however comes with a delay. The net impact from increased prices on raw material and energy was c. 3%- points in the quarter.

At the end of Q2 2022, the total number of branded stores was 94 (91). In Q1 2022, a new Nettoline store opened in Næstved and in Q2 2022, a new Svane Køkkenet store opened in Frederikstad, Norway. Furthermore, new Svane Køkkenet stores will open during Q3 in Arendal and Oslo in Norway, and in addition a new store in Co- penhagen. Furthermore, a new Tvis Køkken store is expected to open in Slagelse during Q3 2022. In Q2 2022, a Svane Køkkenet store closed in Mandal, Norway.

Total number of employees at the end of Q2 2022 was 535 (504).

TCM Group A/S, Skautrupvej 16, DK-7500 Holstebro, Company reg. (CVR) no: 37291269

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Other events in Q2 2022

The annual general meeting was held on 5 April 2022. The annual general meeting approved the proposed dividend distribution of DKK 6 per share, in total DKK 54 million with no dividend distributed for TCM Group's treasury shares. Furthermore, it was approved to autorize the Board of Directors to distribute an extraordinary dividend up to a maximum of DKK 75,000,000 in total in the calendar year 2022.

Jan Amtoft was appointed as new board member at the annual general meeting. Jan Amtoft is CIO in Rockwool A/S. He brings to the Board of Directors experience within digitalisation and automation in production. The Board of Di- rectiors herafter consists of six independent board members, all elected by the annual general meeting.

It was approved to reduce the share capital of TCM Group A/S by DKK 85,770.6 from DKK 1,000,000 to DKK 914,229.4 by allocation of a special reserve. The capital reduction was carried out through annulment of the company's holding of treasury shares. Following the capital reduction the company's holding of treasury shares totals DKK 7,500.

Events after the reporting period

No events of importance to the consolidated interim financial statements have occurred after the reporting period.

Financial outlook

Based on the current market conditions, which is subject to a high degree of uncertainty, we revise our financial outlook: a full year revenue guidance in the range DKK 1,150-1,225 million (unchanged), corresponding to organic growth of 4-11%, and an adjusted EBIT in the range DKK 130-160 million (previously DKK 140-170 million).

Forward looking statements

This interim report contains statements relating to the future, including statements regarding TCM Group's future operating results, financial position, cash flows, business strategy and plans for the future. The statements are based on management's reasonable expectations and forecasts at the time of the disclosure of the report. Any such statements are subject to risks and uncertainties, and a number of different factors, many of which are beyond TCM Group's control, could mean that actual performance and actual results will differ significantly from the expectations expressed in this interim report. Without being exhaustive, such factors include general economic and commercial factors, including market and competitive matters, supplier issues and financial issues.

Significant risks in the Group

TCM Group is exposed to strategic, operating and financial risks, which are described in the management review and note 2 of the 2021 Annual Report prepared in accordance with IFRS. The Russian invasion of Ukraine has impacted the overall supply of raw materials in the European market. For TCM Group the impact has primarily been felt through the further pressure on raw material prices and higher energy and transportation costs. There is a possible risk, that the current high inflation and increasing interest levels among other macro economic indicators could impact the housing market and demand for kitchens, which can impact TCM Group's financial results neg- atively.

TCM Group A/S, Skautrupvej 16, DK-7500 Holstebro, Company reg. (CVR) no: 37291269

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