Earnings call transcript: TCM Group’s Q2 2025 shows steady performance

TCM Group reported its Q2 2025 earnings with a slight miss on revenue forecasts, achieving DKK 349 million against a forecast of DKK 350 million. Despite this, the company demonstrated strong operational performance with a 20% increase in adjusted EBIT and improved gross margins. The stock showed a minor decline of 0.28% following the earnings release. According to InvestingPro analysis, TCM currently appears undervalued based on its Fair Value assessment, with the company maintaining a GOOD overall financial health score.

Key Takeaways

• Revenue slightly missed the forecast by DKK 1 million.
• Adjusted EBIT grew by 20%, reflecting operational efficiency.
• Gross margin improved to 23.7% from 21.5%.
• The stock price decreased by 0.28% post-earnings release.

Company Performance

TCM Group showed resilience in Q2 2025 with a 5% increase in total revenue and a notable 20% rise in adjusted EBIT. The company’s organic growth exceeded 3%, and its EBIT margin improved, indicating strong operational management. The performance in Norway and Denmark, with revenue growth of 5.2%, underscores the company’s robust market position. InvestingPro data reveals the company has achieved a perfect Piotroski Score of 9, suggesting strong financial strength. Subscribers can access 12+ additional ProTips and comprehensive financial metrics through the Pro Research Report.

Financial Highlights

• Revenue: DKK 349 million, a 5% increase year-over-year.
• Adjusted EBIT: DKK 34 million, up 20%.
• Gross margin: 23.7%, up from 21.5%.
• Net working capital ratio: -0.7%.
• Cash conversion: 78.6%.

Earnings vs. Forecast

TCM Group’s revenue slightly missed the forecast of DKK 350 million. The small deviation suggests that the market may not react strongly to this miss, given the company’s overall positive financial performance.

Market Reaction

The stock price of TCM Group decreased by 0.28% to 71.6 following the earnings report. This minor decline indicates a neutral market reaction, with investors likely weighing the slight revenue miss against the company’s operational gains and strategic initiatives. The stock has demonstrated low price volatility, as highlighted by InvestingPro, with a notable YTD return of 18.2% and a beta of 0.57, indicating lower market sensitivity than average.

Outlook & Guidance

Looking forward, TCM Group revised its 2025 revenue guidance to DKK 1.25-1.3 billion and expects adjusted EBIT to range between DKK 90-110 million. The company anticipates a recovery in the B2B segment, particularly from house builders, and potential project sales recovery towards the year-end. With the next earnings report scheduled for October 29, 2025, investors can access detailed financial forecasts and valuation models through the comprehensive Pro Research Report available on InvestingPro.

Executive Commentary

CEO Torben Paulin noted, "Traffic is better than the actual order intake," highlighting the potential for future growth. CFO Thomas Janung mentioned, "We managed to push some price hikes from our suppliers," indicating a strategic approach to managing costs. Paulin also emphasized the positive impact of a strong housing market on TCM’s performance.

Risks and Challenges

• Slower order intake in Q2 could affect future revenue.
• Minimal increase in SG&A costs might pressure margins.
• Market conditions in B2C and B2B segments remain mixed.
• Consumer spending shifts towards travel and leisure could impact sales.
• The timeline for the Silever acquisition could pose integration challenges.

Q&A

During the earnings call, analysts focused on the muted consumer activity in Q2 and the slower order intake in Denmark. Executives clarified the timeline for the Silever acquisition, expected in December, and addressed concerns about the sustainability of gross margins.

Full transcript - TCM Group (TCM) Q2 2025:

Conference Operator: Good day and thank you for standing by. Welcome to the TCM Group Interim Q2 twenty twenty five Report Conference Call and Webcast. At this time, all participants are in a listen only mode. After the speakers’ presentation, there will be a question and answer session. Ask a question and answer session, you need to slowly press star one and one on your telephone.

You will then hear an automated message advising your hand is raised. Please note that today’s conference is being recorded. I would now like to turn the conference over to your speaker, Torbjorn Polin, CEO. Please go ahead.

Torben Paulin, CEO, TCM Group: Thank you very much. Good morning, ladies and gentlemen, and welcome to the presentation of the second quarter results for TCM Group. Presenters today are our CFO, Thomas Janung and myself, CEO, Torben Paulin, and we will comment on the business and the financial results after which we will hand over to the operator for the Q and A session. Let us start the presentation and turn to page two for the business update. Sales in the 2025 developed generally in line with our expectations with growth in both B2C and B2B on the backdrop of the strong order intake in the 2025.

Total revenue increased by 5% to DKK $349,000,000 with an organic growth of more than 3%. The positive development in Norway in Q1 continued in the second quarter with an organic sales growth of more than 5%. Order intake developed positively in B2C even if at a slower pace than in Q1 whereas the B2B segment experienced headwinds in the quarter. Project orders continued to decrease as expected. On a positive note, we saw an increase in orders from house builders in line with the increased activity in residential new builds.

The gross margin improved in the quarter gaining more than two margin points on Q2 last year driven by higher average sales prices and stable input costs in the quarter. Please turn to page three. Some financial headlines for the quarter. Reported revenue was $349,000,000 corresponding to a revenue growth of 5%. Adjusted EBIT was $34,000,000 compared to $28,000,000 in Q2 last year equal to an increase of 20%.

Adjusted EBIT margin was 9.6 compared to 8.4% in Q2 last year. Thomas will elaborate on the underlying drivers of this development. Net working capital ratio was minus 0.7% compared to minus 1.1% last year. Cash conversion was 78.6%. I will now hand over to Thomas to go through the financial highlights.

Thomas Janung, CFO, TCM Group: Thank you, Thorben. Please turn to page four. As mentioned by Thorben, revenue in Q2 increased organically by 3.3% but with a year on year increase of 5.1% due to the acquisition of the two SPAN equipment stores in in January 2025. Revenue in Denmark, our main market, accounting for 81% of the group’s revenue increased by 5.2% year on year with a net chronic growth of 3% supported by a solid growth in B2C revenues. Revenue in Norway in q two twenty five increased by 5.2% due to an improvement in the trading conditions after a long period of very difficult trading.

Share of third party sales in the group was the same as Q2 last year, 24%. Please turn to page five. Our gross margin increased from 21.5% in Q2 last year to 23.7% in Q2 twenty twenty five. The improvement was primarily due to higher average selling prices as a result of the uplift in B2C sales and also stable input costs in the quarter. SG and A costs increased by DKK5 million as a result of the addition of the two Svein equipment stores in the first quarter, whereas our underlying SG and A costs increased by only 3% in the quarter.

As a result of the top line growth and our improved gross margin, we delivered an operating EBIT of 20% from DKK28 million in Q2 last year to DKK34 million this year. This translates to an EBIT margin of 9.6% compared to 8.4% in Q2 last year. Please turn to Page six. Net working capital end of Q2 was minus 9,000,000 Danish kroner compared to 13,000,000 Danish kroner last year, equal to 0.7% of revenue, minus 0.7%, and minus 1.1% last year. Net working capital was negatively impacted by increasing inventories as a result of the the acquisition of the two standard equipment stores in in q one, but also as a result of an increase in inventories of certain externally sourced components.

Net debt was 343,000,000 Danish kroner 2025 compared to 326,000,000 Danish kroner end of q two last year, following a distribution of ordinary dividends of 31,000,000 Danish kroner in the quarter. The leverage ratio decreased from 3.2 times LTM EBITDA last year to 2.5 times EBITDA end of Q2. Please turn to page seven. Free cash flow in Q2 was DKK 32,000,000 compared to DKK 26,000,000 in Q2 last year. CapEx spending was on par with Q2 last year with a CapEx ratio of 1.2% compared to 1.3% in Q2 last year.

Investments related primarily to digitalization in the shape of our new ERP platform and investments in the new laboring facility. Compared to last year, free cash flow was also positively impacted by timing of payment of a corporate income taxes of DKK6 million last year, which this year was paid in the first quarter. Cash flow conversion ratio measured over twelve months was 79%. I will now hand back to Thorben for an update on the Silever acquisition and a review of the financial outlook for 2025. Please turn to page eight.

Torben Paulin, CEO, TCM Group: Thank you, Thomas. In 2021, we merged TCM Group’s online activities in kitchen.dk with Sellebored and acquired a 45% stake in the joint business. Now the majority shareholder has chosen to exercise its put option so TCM Group will acquire the remaining 55%. Silever has been a pioneer in online retailing of kitchens, bathroom interiors, wardrobe solutions and white goods operating kitchen.dk, villiscabe.dk and justlook.dk. Company has grown strongly since 2021 with revenues reaching around 150,000,000 DKKk in 2024.

The purchase price is estimated at 60,000,000 to 85,000,000 with closing expected in the 2025 pending approval. The acquisition give us full ownership, strengthen our digital position and supports our multi channel growth strategy. Please turn to page nine. Considering the results from the first six months of the year and the development in order intake during Q2, we are narrowing our guidance for 2025. TCM Group now expects full year revenue in the range of DKK1.25 to DKK1.3 billion, previously DKK1.25 billion to DKK1.325 billion and adjusted EBIT of CHF 90,000,000 to CHF 110,000,000 previously CHF 90,000,000 to 115,000,000.

As previously communicated this guidance assumes full ownership of Celevot towards the very end of the year. This concludes our presentation and we will now hand over to the operator for the Q and A session.

Conference Operator: Thank you,

Anders Christian Pritzman, Analyst, Danske Bank: sir.

Conference Operator: We are now going to proceed with our first question. And the questions come from the line of Anders Christian Pritzman from Danske Bank. Please ask your question.

Anders Christian Pritzman, Analyst, Danske Bank: Thank you very much, and good morning, Thorben and Thomas, and thank you for taking my questions. You mentioned in the report a muted consumer during the second half of Q2 compared to the first half. I was wondering if you’re able to quantify this a bit. I mean, you see a drop in meetings or general traffic at the stores? And how much lower was it than expected?

Torben Paulin, CEO, TCM Group: Yes. It’s correct that after a very, very strong order intake in the Q1, in the second half of Q2, traffic and signing of orders in the stores was at a lower level for the B2C consumers. Whether this has to do with a nice spring weather, people traveling even more than than ever, we we don’t know. And now we are following closely how it picks up after the summer holiday. People some people are back from holiday, school start, etcetera.

So we have our first design weekend now coming up, September, and there we will we will follow how very closely how how people are acting now. But with with with this knowledge from the from the sec from second quarter and especially the second half of it, we we have decided narrowing our guidance.

Anders Christian Pritzman, Analyst, Danske Bank: And it’s difficult to

Torben Paulin, CEO, TCM Group: quantify more precisely because we have also said several times in spring that we have satisfying traffic, but we also experience consumers to hesitate to sign up for the final order. So so traffic is is better than than the actual order intake. And, yeah, it’s interesting to see how that will develop.

Anders Christian Pritzman, Analyst, Danske Bank: Thank you very much, Thorben. That was very clear. The muted performance, is it something that you see across all of Denmark? Or do you see certain pockets of areas where activity has remained good or maybe worse than expected as well?

Torben Paulin, CEO, TCM Group: Good question. We have early on said that we have seen different development from the bigger cities to the countryside and the other way around. This development has been all over Denmark. No specific geographical differences. And we have also said earlier on that we have seen a more a better development in our higher end position in brands and less in the lower end.

But today, it’s also equal in both the lower end and the high end. So it’s across all brands.

Anders Christian Pritzman, Analyst, Danske Bank: Okay. Thank you. A question on the guidance for the full year, which you take the top down a little bit. But looking at your ranges, your guidance still implies growth between 2% to 11% for H2. Can Can you please reiterate what would need to happen for you to end up in either of these ranges for H2, please?

Torben Paulin, CEO, TCM Group: End up in the high end, it takes that the B2B segment develops as we also described in house builders picking up. And we are still hoping that we start also seeing some of the project sales coming slowly back towards the end of the year. And then the main driver is that the private consumer, the B2C market is coming strongly back and also relatively soon so that we can deliver this year.

Anders Christian Pritzman, Analyst, Danske Bank: Okay. And if we assume that the CELIBOR acquisition is further delayed until 2026, how much would your growth expectations then be changed for H2?

Torben Paulin, CEO, TCM Group: It’s so little included in the guidance now that I don’t think it will have any significant changes. The message from the lawyer that is handling it for says that it’s four to five months time. So so we are calculating that it will happen during December.

Anders Christian Pritzman, Analyst, Danske Bank: Okay. That’s very helpful.

Torben Paulin, CEO, TCM Group: First of December or December 15, or it will be it will affect from January 1 some somewhere around December.

Anders Christian Pritzman, Analyst, Danske Bank: Okay. Thank you, Thorben. A final question for me then. You state that your Lacquerain facility has now been completed in this quarter, and it’s expected to ramp up during Q3. Can you just remind us again what impact on the gross margins you expect from this ramp up in H2?

Thomas Janung, CFO, TCM Group: I don’t think we have been sort of very specific on the exact impact on the direct margin, right? I think we previously communicated sort of less than one percentage point. So it’s not the one that’s going to change the picture dramatically, but of course, it’s a positive lever, one of many levers that we have. Right? So it’s not I’m not saying that you would be able to see directly into our our numbers.

Anders Christian Pritzman, Analyst, Danske Bank: Alright. Thank you, Thorn and Thomas. That was all from me. Bye.

Thomas Janung, CFO, TCM Group: Thank you, Thomas.

Conference Operator: As a reminder to ask a question, you need to slowly press We are now going to proceed with our next question. And the questions come from the line of Christian Tonneau from SEB. A

Christian Tonneau, Analyst, SEB: couple of questions from my side as well. Just a clarification on your comments on orders and traffic, Toren. You say that you saw orders slow down, and then you sort of refer to summer holiday and weather. I mean, I I obviously, we cannot see the exact numbers on orders, but I would assume that there is a seasonality where orders usually slow during summer. So so maybe just if you can elaborate, I mean,

Thomas Janung, CFO, TCM Group: whether you’re slower or not

Torben Paulin, CEO, TCM Group: absolutely right, Christian. That summer months is normally the weakest month both of course customers are on holiday, B2B customers on holiday and so is also some of our sales consultants. But what is different this year is that this slowdown started earlier than we see normally. It was maybe second half of the quarter. So it was not July.

It was mid May and for the rest of the quarter. But you can also see, all airports, they report new records from people traveling. And if you look at spending monitor, it’s also traveling in leisure, etcetera. That is where people they are spending money. So maybe we don’t know.

One of the positive signs is that the housing market and the number of houses and apartments sold is still strong. However, at increasing prices, which mean that what is left for for kitchens or other renovation is maybe less than than before. But we we still believe that a strong housing market is positive for for our market, therefore, we could expect the customers to turn back here after holiday.

Christian Tonneau, Analyst, SEB: Makes sense. And then you also said that you saw traffic slow down in the in the stores, but at the same time, you say that that traffic was satisfying. So so how exactly should we interpret that? I mean, is is the slowdown then more a normal seasonality? Or?

Torben Paulin, CEO, TCM Group: It’s two things. When I say traffic slowed down, it was compared to a very strong Q1. Still no dramatic low situation, but not on the same level as Q1. And then we have had for a period that the consumers they are taking longer time to make the final decision and sign the quotation. So depending on how this picture is going to look like in the autumn can mean that we get the orders, but we get them so late so they will not be delivered and invoiced this year.

But we and again, it’s too difficult to judge on July and August. We need to come into the stronger months as September and October to understand where the consumers are and and how fast they are to to decide. So so that that that is our considerations when we have adjusted our guidance.

Christian Tonneau, Analyst, SEB: That makes sense. Thanks for clarifying. Then just to your gross margin, which was quite strong in the quarter, and you also highlighted price increases being larger than cost inflation. Do you expect that effect to be sustainable, I. E, the gross margin in the second half of the year should also be somewhat strong?

Thomas Janung, CFO, TCM Group: Expect the question, we expect some of it to sort of be sustainable, right? I think it’s fair to say that we managed somehow to push some of the price hikes from our suppliers in front of us, but we do expect it to materialize in the second half of the year. We can only push back so much, right? So, I don’t think that the direction is it will be the same. You will see improved margins year on year also in the second half of the year, but probably not to the same extent as we see here in the second quarter.

I mean, the second quarter also always benefits from my very high capacity utilization, and that is that is very healthy for our direct margin. Right? So I don’t think we should see here the same this has had the same absolute uplift in the second half of the year, but trend and direction will be the same.

Christian Tonneau, Analyst, SEB: That makes sense. And then just the last question. So the acquisition price of the shares in Insuliba, the range you’ve provided is is rather large. So just comment on why you have such a large range, and when do you expect to to settle the exact amount?

Torben Paulin, CEO, TCM Group: The reason for the wide range is that the agreement on the acquisition of the remaining 55% is made on in an agreement with different dimensions and drivers. And in all deals there is a seller that has one goal and then there is a buyer that has another goal. And you know, we are in those negotiations, and depending on where they are ending, we will be somewhere in the range. You could say normally we would get that negotiations done. But now that we are awaiting the approval on the acquisition, then we also utilize this time to do the negotiations.

So, hopefully, we we have the final price when we also have the approval.

Christian Tonneau, Analyst, SEB: Okay. Is there any risk that the deal will go through because you cannot settle on the price?

Torben Paulin, CEO, TCM Group: Don’t think so. We don’t expect it. Yeah. We are so far now that we we have made a we say the the agreement that we have made will in indicates that the deal will go through.

Christian Tonneau, Analyst, SEB: All right. Good to hear. Great. Thank you so much. That was all from my side.

Torben Paulin, CEO, TCM Group: Thank you.

Conference Operator: We have no further questions at this time. So I hand back to Mr. Thorben Poland, CEO, for closing remarks.

Torben Paulin, CEO, TCM Group: Thank you very much. Thank you for your time and for participating. Thank you for your questions. We wish you all a good day. Thank you.

Conference Operator: This concludes today’s conference call. Thank you all for participating. You may now disconnect your lines. Thank you, and have a great day.

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