TCM Group A/S (TCM) Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to the TCM Group Interim Q2 2026 Report Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Jens-Peter Poulsen.

Good morning, ladies and gentlemen, and welcome to the presentation of the second quarter results for TCM Group. As most of you will know, I took over as CEO of TCM Group on August 1, succeeding Torben Paulin. I'm happy to have joined TCM Group and returned to the kitchen industry. I've actually followed TCM Group from the sidelines since my time at Kvik started back in 2013. Presenters today are our Interim CFO, Hans Barslund, and myself, Jens-Peter Poulsen, as CEO, and we will comment on the business and the financial results, after which we'll hand over to the operator for the Q&A session. Let's start the presentation and turn to Page 2 for the business update. I don't see the presentation?

No, but it's there, so we can just continue.

Sales in the second quarter developed broadly in line with our expectations. Total revenue for the quarter increased 7.4% year-on-year to DKK 375 million, corresponding to an organic growth of 0.6%. Revenue was negatively impacted by lower order intake at the end of Q1 and the start of Q2, but order intake regained momentum during the last 2 months of the quarter. Revenue in Norway increased by 22.7% compared to Q2 2025, reaching DKK 80 million, driven by an improvement in trading conditions following a period of very low activity in the market. We also managed to renegotiate our agreement with Optimera, our exclusive AUBO partner in Norway, extending the term from 3 to 5 years. Overall, order intake in the quarter was significantly higher than last year in both B2B and B2C. The sales price increase effective from 1st of July brought some orders forward, and we entered the second half of the year with a strong order book. Gross margin was broadly stable at 23.8%, up from 23.7% in Q2 last year. Please turn to Page 3. Some financial headlines for the quarter. Reported revenue was DKK 375 million, corresponding to a revenue growth of 7.4%, thereof 0.6% organic. Adjusted EBITA was DKK 32.2 million compared to DKK 36.1 million in Q2 last year. Adjusted EBITA margin was 8.6% compared to 10.3% in Q2 last year. Net working capital ratio was minus 2.3% compared to minus 0.7% last year. Cash conversion was 107%, and we'll now dive into the numbers in the coming slides. Please turn to Page 4. As mentioned, revenue in Q2 increased organically by 0.6% with a year-on-year increase of 7.4%, driven by the addition of Celebert and the retail stores. Revenue in Denmark, our main market at 78.1% of group revenue increased by 4.2% year-on-year. Though with an organic decline of 4.1%, reflecting the softer order intake at the end of Q1 and the start of Q2. The Danish market regained traction towards the end of the quarter. Revenue in Norway increased by 22.7% to DKK 80 million against the weak reference period last year. And the share of lower-margin third-party sales increased to 25% in Q2, up from 23% in Q1. I'll now hand over to Hans Barslund. Please turn to Page 5.

Thank you, Jens-Peter. Gross margin was 23.8% in Q2, a minor improvement to the 23.7% in Q2 last year. The gross margin ratio is affected by 2 opposing effects. Rising oil prices increased the cost of raw materials and freight, which has a negative effect on the margin. But this was offset by a higher B2C share and our ongoing internal efficiency projects with a positive effect on the margin. Year-to-date, gross margin increased to 23.5% compared to 22.5% last year. Operating expenses increased 23% to DKK 62.8 million or 16.8% of the revenue, up from 14.7% last year. This is primarily a consequence of the inclusion of Celebert and the retail stores acquired during last year as well as additional overhead related to organizational upgrades and marketing platform enhancements in Celebert as we move towards a more self-service model there. In addition to that, we have had extra costs in relation to the ongoing ERP project. Adjusted EBITA in Q2 was DKK 32.2 million compared to DKK 36.1 million in the same period last year, corresponding to an adjusted EBITA margin of 8.6% against 10.3% last year. Adjusted EBITA year-to-date was DKK 58.4 million compared to DKK 55.7 million last year. We recorded nonrecurring items of DKK 1.5 million in the quarter relating to the change in management. There was no nonrecurring items in the same period last year. Please turn to Page 6. Net working capital at the end of Q2 was minus DKK 31.5 million compared to minus DKK 9.3 million last year, corresponding to a net working capital ratio of minus 2.3% against minus 0.7% last year. If you break it down, then inventories increased by DKK 11 million from acquisition of Celebert and one retail store, combined with higher factory inventories to support increased demand. Trade and other receivables actually decreased despite the higher revenue. Operating liabilities increased by DKK 29 million, primarily due to higher trade payables, partly a timing effect around the quarter end and therefore, not a permanent nature. Net interest-bearing debt amounted to DKK 397 million at the end of Q2 compared to DKK 343 million last year. The increase is primarily a consequence of the Celebert acquisition at the end of last year. As a reminder, the dividend of DKK 46 million approved at our Annual General Meeting in April was paid out during the quarter and is reflected in the net interest-bearing debt development. The leverage ratio increased to 2.7x at the end of Q2 compared to 2.5x in the same period last year and remains well within our covenants. Please turn to Page 7. Free cash flow in Q2 was DKK 32 million, essentially in line with Q2 last year. For the first half of the year, free cash flow was DKK 80 million, a significant improvement compared to DKK 29 million in the same period last year, benefiting from the positive development in net working capital. CapEx ratio was 1.1% of revenue compared to 1.2% last year. Year-to-date investments amount to DKK 26 million, down from DKK 34 million last year. The investment is primarily related to the ongoing ERP project. Cash conversion measured over the last 12 months was 107%. I'll now hand back to Jens-Peter. Please turn to Page 8.

So the results for the first half of 2026, together with the positive development in order intake during the second quarter, provide a positive backdrop for the remainder of the year. That said, we remain mindful of the potential impact of ongoing geopolitical uncertainty, including the situation around the Strait of Hormuz on consumer sentiment and demand. Taking this into account, we maintain our current guidance for 2026 and TCM Group thus expects full year revenue in the range of DKK 1.4 million (sic) [ DKK 1.4 billion ] to DKK 1.5 million (sic) [ DKK 1.5 billion ] in sales and adjusted EBITDA of between DKK 120 million and DKK 140 million. Before we conclude our presentation, I'd like to inform you that our new CFO, Refsgaard Trier Lund, will join TCM as of September 1. This concludes our presentation, and we'll hand over to the operator for the Q&A session. Please turn to Page 9.

[Operator Instructions]. We will now take our first question from the line of Kristian Tornøe from SEB.

And of course, welcome to you, Jens-Peter. Looking forward to the dialogue. A couple of questions from my side. As I understand your description of the order pattern, it was weak in March and April and then strong in May and June. Just curious on what your sort of interpretation of this volatility is. Why do you think it picked up in May and June? And of course, the strength and the momentum in May and June, did that continue in July?

Thank you, Kristian, for the warm welcome. I'm very sure that a big impact on the growth in order intake at the end of Q2 was driven by the announced price increase. We don't know exactly how big a chunk of the increase was attributed to the price increase, but my assessment is it's a big chunk of it. If we look at the market, both B2C and B2B, that has not improved in the period. The interest development definitely does not support a stronger B2B market. And if we look at the development on consumer confidence, especially in Denmark, that remains at a double-digit negative. And even though it's improved a little bit, it's still hugely negative. So it's not the market that's bringing the uplift in the order intake during the quarter. It is mostly the price increase. Having said that, there's always, of course, movements in our ability to win orders in both segments, B2C and B2B.

Okay. That makes sense. But have you then seen orders slow down in July because price increases took effect from July 1, right?

Yes. We are seeing a softer July, both because it's the seasonal pattern, of course, but also relative to last year. And I do expect some impact during Q3 as it definitely moved orders in the pipeline forward. So I do expect some impact. However, on the other hand side, there are also here and there are positive signals of us winning still in a difficult market during Q3. So it's really hard to assess the net impact in Q3.

That makes sense. That brings me to my next question, which is your guidance. If we look at the implicit guidance for the second half of the year, it implies revenue growth of 7% to 23%. So the 7%, I guess, is more or less sort of a continuation of the momentum we had in the first half. But obviously, 23% revenue growth would mean a substantial step-up. And given that the order strength you referred to more seems like a phasing due to price increases, what brings you any confidence that you can deliver more than 20% growth?

We have not related to the upper end of the spectrum right now. But in the dialogues with the dealers that we have, we have everything from dealers that see a moderate single-digit development to dealers having a strong double-digit development. And that's why we maintain the spread on the top line guidance here, Kristian. It's really hard to gauge that one.

Okay. So one thing is the revenue guidance. Obviously, the other thing is the earnings guidance. Again, if we look at the first half of the year, revenue increased by DKK 80 million, but your adjusted EBITA only increased by DKK 3 million, sort of implying an incremental margin of only 3%. And I guess the reason for that low number is the substantial increase in your OpEx, if you do the same calculation for your implicit guidance for the second half of the year, you would need an incremental margin of 18% to 19%. So obviously, quite a meaningful improvement. So can you maybe just help me understand the mathematics really here and especially what you are assuming on the OpEx within your guidance?

Hans, will you pick that up?

It's correct that your calculation, I can confirm that. But we also have to look into that we have some one-off costs or extraordinary costs here in the first half of the year. And then, of course, the addition of Celebert, of course, will also be a part of the second half of the year. But what we also will see is that our gross margin in the first half year were heavily influenced by the input cost increase. And of course, that will continue into the second part. But there we will see some effects from our sales price increase. So we expect our gross margin to improve in the second half of the year.

All right. Maybe just to understand, so if I understood you correctly, when you say you had some one-off costs in the first half, does that mean all things equal, we should expect, I mean, a lower fixed cost base in the second half of the year or ask differently, your OpEx?

You should expect a lower OpEx ratio in the second part than in the first part of the year.

Okay. That is clear. And then to your other point around the price increases and the cost pressure. So orders taken at the end of the quarter, they would be booked as revenue in Q3, right? So you will still carry that gross margin pressure into Q3 in your P&L. Is that correct?