Today, and thank you for standing by, welcome to the TCM Group Interim Q2 2025 Report Conference Call and Webcast. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the 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. To withdraw your question, please press star one and one again. Please note that today's conference is being recorded. I would now like to hand the conference over to your speaker, Torben Paulin, CEO. Please go ahead.
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 Hjannung, 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&A session. Let us start the presentation and turn to page two for the business update. Sales in the second quarter of 2025 developed generally in line with our expectations, with growth i n both B2C and B2B on the backdrop of the strong order intake in the first quarter of 2025. Total revenue increased by DKK 5% to DKK 349 million, 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 DKK 349 million, corresponding to a revenue growth of 5%. Adjusted EBIT was DKK 34 million, compared to DKK 28 million 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 -0.7%, compared to -1.1% last year. Cash conversion was 78.6%. I will now hand over to Thomas to go through the financial highlights.
Thank you, Torben. Please turn to page four. As mentioned by Torben, 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 Svane Kjøkkenet stores in Nordkår, Jørgen, 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 an organic growth of 3%, supported by a solid growth in B2C revenue. Revenue in Norway in Q2 2025 increased by 5.2% due to an improvement in the trading conditions after a long period of very difficult trading. The 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 2025.
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&A costs increased by DKK 5 million as a result of the addition of the two Svanø Køkken stores in the first quarter, whereas our underlying SG&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 uplift in EBIT of 20% from DKK 28 million in Q2 last year to DKK 34 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 in Q2 was minus DKK 9 million compared to DKK 13 million last year, equal to -0.7% of revenue, and -1.1% last year.
Net working capital was negatively impacted by increasing inventories as a result of the acquisition of the two Svanø Køkken stores in Q1, but also as a result of an increase in inventories of certain externally sourced components. Net debt was DKK 343 million end of Q2 2025, compared to DKK 326 million end of Q2 last year, following a distribution of ordinary dividend of DKK 31 million in the quarter. The leverage ratio decreased from 3.2x LTM EBITDA last year to 2.5x EBITDA end of Q2. Please turn to page seven. Free cash flow in Q2 was DKK 32 million compared to DKK 26 million 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 lettering facility. Compared to last year, free cash flow was also positively impacted by timing of payment of the corporate income taxes of DKK 6 million last year, which this year was paid in the first quarter. Cash conversion ratio measured over 12 months was 79%. I will now hand back to Torben for an update on the Celebert ecosystem and a review of the financial outlook for 2025. Please turn to page eight.
Thank you, Thomas. In 2021, we merged TCM Group's online activities in Kitchen.dk with Celebert and acquired a 45% stake in the joint business. Now, the majority shareholder has chosen to exercise his put option, so TCM Group will acquire the remaining 55%. Celebert has been a pioneer in online retailing of kitchens, bathroom interiors, wardrobe solutions, and wipe booths, operating Kitchen.dk, Billysgave.dk, and Justwork.dk. The company has grown strongly since 2021, with revenues reaching around DKK 150 million in 2024. The purchase price is estimated at DKK 60 million-DKK 85 million, with closing expected in the end of 2025, pending approval. The acquisition gives us full ownership, strengthens 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 DKK 1.25 billion-DKK 3 billion, previously DKK 1.25 billion-DKK 1.325 billion, and adjusted EBIT of DKK 90 million-DKK 110 million, previously DKK 90 million-DKK 115 million. As previously communicated, this guidance assumes full ownership of Celebert toward the very end of the year. This concludes our presentation, and we will now hand over to the operator for the Q&A session.
Thank you, sir. As a reminder to ask a question, please slowly press star one and one on your telephone and wait for your name to be announced. To withdraw your question, please press star one and one again. Once again, please slowly press star one and one on your telephone and wait for your name to be announced. To withdraw your question, please press star one and one again. We are now going to proceed with our first question. The questions come from the line of Anders Christian Preetzmann from Danske Bank. Please ask your question.
Thank you very much, and good morning, Torben 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, did you see a drop in meetings or general traffic at the stores, and how much lower was it than expected?
Yeah, it's correct that after a very, very strong order intake in 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 nice spring weather or people traveling even more than ever, we don't know. We are following closely how it picks up after the summer holiday. Some people are back from holidays, school start, etc. We have our first design weekend now coming up, first weekend of September, and we will follow very closely how people are acting now. With this knowledge from the second quarter and especially the second half of it, we have decided to narrow our guidance.
It's difficult to quantify it 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. Traffic is better than the actual order intake. Yeah, it's interesting to see how that will develop.
Thank you very much, Torben. 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?
Good question. We have earlier 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. We have also said earlier on that we have seen a better development in our higher-end positioned brands and less in the lower end. Today it's also equal in both the lower end and the high end. It's across all brands.
Okay, thank you. A question on the guidance for the full year, which you checked the top down a little bit. Looking at your ranges, your guidance still implies growth between 2%- 11% for H2. Can you please reiterate what would need to happen for you to end up in either of these ranges for H2, please?
To end up in the high end, it takes that the B2B segment develops, as we also describe in house builders are picking up. We are still hoping that we start also seeing some of the project sales coming slowly back towards the end of the year. 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.
If we assume that the Celebert acquisition is further delayed until 2026, how much would your growth expectations then be changed for H2?
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 us says that it's four to five months' time. We are calculating that it will happen during December.
Okay, that's very helpful.
The first of December or 15th of December, or it will be with effect from 1st of January, somewhere around December.
Okay, thank you, Torben. A final question from me then. You state that your lettering 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 margin you expect from this ramp-up in H2?
I don't think we have been very specific on the exact impact on the direct margin, right? I think we previously communicated less than 1%. It's not the one that is going to change the picture dramatically. Of course, it's a positive lever, one of many levers that we have, right? I'm not saying that you would be able to eat directly into our numbers.
All right. Thank you, Torben and Thomas. That was all from me.
Thank you, Anders.
As a reminder to ask a question, you need to slowly press star one and one on your telephone and wait for your name to be announced. To withdraw your question, please press star one and one again. We are now going to proceed with our next question. The questions come from the line of Kristian Tornøe from SEB. Please ask a question.
Yes, thank you. Good morning. A couple of questions from my side as well. Just a clarification on your comments on orders and traffic, Torben. You say that you saw orders slow down, and you sort of refer to summer holiday and weather. Obviously, we cannot see the exact numbers on orders, but I would assume that there is a seasonality where orders usually slow during summer. Maybe just if you can elaborate, whether you slow down out of the ordinary.
You are absolutely right, Kristian , that the summer month is normally the weakest month. Both the customers are on holiday, B2B customers on holiday, and so are also some of our sales consultants. What is different this year is that this slowdown started earlier than we see normally. It was maybe the second half of the quarter, so it was not July. It was mid-May and for the rest of the quarter. You can also see all airports report new records from people traveling. If you look at the spending monitor, it's also traveling and leisure, etc. That is where people are spending money. 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 means that what is left for kitchens or other renovations is maybe less than before.
We still believe that a strong housing market is positive for our market, and therefore we could expect the customers to turn back here after holiday.
That makes sense. You also said that you saw traffic slow down in the stores, but at the same time, you say that traffic was satisfying. How exactly should we interpret that? I mean, is the slowdown then more a normal seasonality?
No, 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. We have had for a period that consumers, they are taking longer time to make the final decision and sign the quotation. Depending on how this picture is going to look like in the autumn, it can mean that we get the orders, but we get them so late so they will not be delivered and invoiced this year. 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 how fast they are to decide. That is our considerations when we have adjusted our guidance.
That makes sense. Thanks for clarifying. Just to your gross margin, which was quite strong in the quarter, you also highlight the 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.
Kristian , we expect some of it to sort of be sustainable, right? I think it's better to say that we managed somehow to push some of the price hikes from our suppliers in front of us. We do expect it to materialize in the second half of the year. We can only push back so much. I don't think that, you know, the direction 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've seen here in the second quarter. I mean, the second quarter also always benefits from very high capacity utilization, and that is very healthy for our direct margin, right? I don't think we should see necessarily the same absolute uplift in the second half of the year, but the trends and directions will be the same.
That makes sense. Just the last question. The acquisition price of the shares in Celebrity, the range you've provided is rather large. Could you comment on why you have such a large range and when you expect to settle the exact amount?
The reason for the wide range is that the agreement on the acquisition of the remaining 55% is made in an agreement with different dimensions and drivers. In all deals, there is a seller that has one goal, and then there is a buyer that has another goal. We are in those negotiations, and depending on where they are ending, we will be somewhere in the range. Normally we would get that negotiation done, but now that we are awaiting the approval on the acquisition, we also utilize this time to do the negotiations. Hopefully, we have the final price when we also have the approval.
Okay. Is there any risk that the deal will not go through because you cannot settle on the price?
I don't think so. We don't expect it. We are so far now that we have made an agreement that will indicate that the deal will go through.
All right. Good to hear. Great. Thank you so much. That was all from my side.
Thank you.
We have no further questions at this time. I'll hand back to Mr. Torben Paulin, CEO, for closing remarks.
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.
This concludes today's conference call. Thank you all for participating. You may now disconnect your lines. Thank you and have a great day.