Earnings Call: Q3 2025

Nov 25, 2025

Good day, and thank you for standing by. Welcome to the TCM Group Interim Q3 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 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 turn 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 third-quarter results for TCM Group. Today, I, Torben Paulin, the CEO of TCM Group, will be presenting, and I will comment on the business and the financial results, after which I will hand over to the operator for the Q&A session. I would like to share that our new CFO, Jannung Ohlendorf-Messen, started in TCM Group on the 1st of November. Prior to his assignment, he had made other arrangements. I'll hear from next time. Let us start the presentation and turn to page two for the business update. Sales in the third quarter developed in line with our expectations, with growth in both B2B segments. Total sales in the third quarter increased by 4.1% year-on-year to DKK 289 million, to an organic growth of 2.7%. Overall, increased by 7.0% compared to Q3 2024, reaching 51 million DKK, continuing the positive trend from the first two quarters of the year. Order intake developed positively in B2C, and the B2B segment experienced solid growth in the quarter, mainly driven by increased orders from house builders and in line with higher activity in residential new builds. The gross margin improved in the quarter, gaining one margin point on Q3 last year, driven by higher average selling prices and efficiency gains in the supply chain. Please turn to page three. Some financial headlines for the quarter. Reported revenue was 289 million DKK, corresponding to a revenue growth of 4.1%, year-over-year 2.7% organic. Adjusted EBIT was 17 million DKK, compared to 17 million in Q3 last year. Adjusted EBIT margin was 5.8%, compared to 6.0% in Q3 last year. Net working capital ratio was 0.6%, compared to 0% last year. Cash conversion was 75%. I will now go through the financial highlights. Please turn to page four. As mentioned, revenue in Q3 increased organically by 2.7%, but with a year-on-year increase of 4.1% due to the acquisition of two Svanek Køkkenstores in Aalborg and Hjørring in January 2025. Revenue in Denmark, our main market, accounts for 82% of the group's revenue. It increased by 3.5% year-on-year, with an organic growth of 1.8%, supported by modest growth in the B2C segment, while segments within B2B also delivered growth during the quarter. Revenue in Norway in Q3 increased by 7% compared to Q3 2024, continuing the positive trend from the first two quarters of the year. The share of third-party sales was the same as in Q3 last year, 26%. Please turn to page five. Gross margin rose to 21.4% in Q3, compared to 20.3% in Q3 2024, driven by higher average selling prices and efficiency gains in production and the supply chain. EBIT in Q3 2025 was DKK 17 million, compared to DKK 17 million last year, corresponding to an EBIT margin of 5.8%, compared to 6.0% in Q3 last year. The EBIT margin decrease is primarily driven by an increase in SG&A cost due to the increase in employees from the acquisition of retail stores. Depreciation and amortization in Q3 2025 amounted to DKK 9 million, the same as last year. Please turn to page six. Net working capital end of Q3 was DKK 8 million, compared to DKK 1 million last year. Compared to Q3 2024, working capital was negatively impacted by an increase in inventories due to the acquisition of the two Svanek kitchen stores and an Aalborg store in Esbjerg and a Nettoline store in Kolding. Working capital was also negatively impacted by an increase in inventories of certain externally sourced components. Net interest-bearing debt amounted to DKK 349 million at the end of Q3 2024, compared to DKK 329 million in Q3 last year. The leverage ratio was 2.6 at the end of Q3, compared to 2.8 at the end of Q3 last year. Please turn to page seven. Free cash flow in Q3 2025 was DKK 4 million, compared to DKK 6 million in Q3 last year, negatively impacted by the development in working capital. Free cash flow was positively impacted by dividend received from Celebat of DKK 7 million in Q3 2025. Cash conversion ratio measured over 12 months was 75%. We will now give an update on the Celebat acquisition. Please turn to page eight. In 2021, we merged TCM Group's online activities in Kitchen.dk with Celebat 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%. Celebat has been a pioneer in online retailing of kitchens, bathroom interiors, wardrobe solutions, and light goods, operating Kitchen.dk, Billyskabe.dk, and Justwood.dk. The purchase price is DKK 80 million. The Danish competition authorities have approved the transaction, and it is closed today, the 25th of November 2025. The acquisition gives us full ownership, strengthens our digital position, and supports our multi-channel growth strategy. Please turn to page nine for the financial outlook. Considering the results for the first nine months of the year and the current trend in order intake during Q3, TCM Group is narrowing its full-year 2025 guidance. The company now expects revenue in the range of DKK 1.26 billion to DKK 1.28 billion, previously DKK 1.25 to 1.3 billion, and adjusted EBIT in the range of DKK 93 million to DKK 100 million, previously DKK 90 million to DKK 110 million. TCM takes full ownership of Celebat on the 25th of November 2025. Celebat will be included in our consolidated figures for December month. It is assessed to have an insignificant effect on the 2025 TCM figures. This concludes our presentation, and we will now hand over to the operator for the Q&A session. Thank you. 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 Christian Tonel from SCB. Please ask your question. Yes, thank you. I have a couple of questions. Firstly, if we look at revenue, it's up 4% year-on-year, but your selling and administrative expenses are up by 12% year-on-year. Torben, you briefly touched upon it yourself, but can you just go through this sort of negative impact on your leverage, and especially how to model the SG&A cost going forward? Yes, but we took over the two Svane stores back in January 2025. They are fairly big stores, especially the one in Aalborg. They come both with revenue, but they also come with rent and salary cost, SG&A. Since the takeover, we have worked on exercising a turnaround in the two stores. The retail margin is then consolidated into our figures. That is also why the gross margin is positively impacted. But you know also those costs that are coming with the stores that we took over because they were not profitable at that time. We have to admit that we have been struggling also to do the turnaround during the year. That is why the total result is higher revenue, higher gross margin, but lower profit. When it comes to looking ahead, the stores are now performing a lot better than when we took them over. We start to see a break-even not so far away in the operation of the two stores. Then we took over one Aalborg store in Esbjerg on the 1st of September and one Nettoline store in Kolding. It's a little bit the same again, new management in place, and then to work on professionalizing and optimizing the operation of the stores. Both of them are significantly smaller stores than the Svane stores in Aalborg and Hjørring. So you will see a little bit the same picture also in the future, but hopefully soon that we can get break-even and get them profitable. Even more, we are working on also to sell the stores to new local owners again. There is a dialogue going on with potential owners in Esbjerg. There is a potential owner in place in Kolding as daily manager and the same in Aalborg and Hjørring. But as the stores that are coming out of not being profitable, of course, they need to get some confidence and comfort in that they will be capable of operating them profitably before they want to take over. In terms of the revenue impact from this labor acquisition and I guess also the two smaller Aalborg and Esbern stores, can you just sort of remind us how much inorganic revenue or how much added revenue these three acquisitions give you in 2026? The two smaller stores will be minor because it's also consolidated into the internal turnover. So it will not be a part of this internal turnover will be eliminated. So that is not a lot. For Celebat for December month, I guess can calculate with around $10 million. And for '26 in Celebat? We will say more about that when we present our budget for 2026. But I think we have mentioned in relation to the acquisition early on that the yearly turnover is around $150 million. And that still holds the slow sort of material changes to that? No. Then we will have to communicate about it when we present our expectations for 2026. Fair enough. Then on your order commentary, it seems quite positive for Q3 and especially as I read your report, you indicate that order momentum has improved during Q3. I'm obviously just curious whether the positive momentum has continued in October and beginning of November. I think the most positive way to phrase it is that it's stable. It's not fantastic, but it's stable, I would say. Now we are having a slowdown, but that's probably more seasonality that when we are getting so close to Christmas, then people, they have other top-of-mind things to do. So it's not any big changes. Just to understand, when you say you have a slowdown, is that relative to what you saw in Q3, or is that relative to what you saw in October, November last year? Yeah. I would say it's normal. It's the same level as last year. All right. Thank you. That was all for me. Thank you. Thank you. We are now going to proceed with our next question. The questions come from the line of Anders Christian Prisman from Danske Bank. Please ask your question. Thank you very much and good morning, Torben, and thank you for taking my questions here. Just to touch upon the Danish B2C sales again, is it still the higher end of the product line carrying the torch, or what is going on with the lower end of the market? Is that starting to contribute as well? I think the right way to put it is that the order intake is developing in all areas of the market, as well the lower end as the high end. And then also the house builders, we have seen a good uplift in the beginning of the year, in the first half of the year, maybe stabilizing a little bit on that level now in the autumn. House builders are normally above the mid-market, so maybe a little bit more there than in the low end, but all our brands are having increases. Okay. Thank you. That's very clear. And your positive results again for Norway here in Q3, do you have similar expectations for the Norwegian business here going forward? Do you still expect good performance in Q4, and what is your visibility on this? As Norway is coming from a very, very low level for a long, long period, the increase in the order intake is also expected. We haven't, though, seen the interest decreasing in Norway as expected. I think also the market is right now a little bit hesitating to see what is happening on that side. There is a huge demand in Norway for new builds and also renovations. That would normally mean that the good development should continue. But again, it's coming from a low level, and it's still early days to say something very solid on the future. All right. Thank you. That's also very clear. Another question on the narrowing of the full-year guidance here with just one month to go for the full year. The implied Q4 results that shows a top-to-bottom range of $20 million on revenue and on EBIT. Can you please just share your assumptions behind this updated guidance and again, what would need to happen to reach either end, please? Yeah. It's all the usual topics when we come to year's end. It is sales mix, both between the high margin and the low margin segments. It is the share of the third-party products that has a very, very low margin. Then it's how we succeed to deliver in the final weeks of the year. So we have every week, every month, we have orders that are postponed to the week or the month after, and that makes no difference in our quarterly results. But when we come to the end of the quarter, and especially when we come to year's end, then it makes a big difference if some orders are postponed for whatever reasons it can be. For us to reach the high end, we should have a high share of B2C, and we should get all the capacity that we are having in our four factories should then be utilized, and hopefully a little bit more than 100%. If that is not the case, then we are coming towards the low end. It's all those usual things that we cannot determine before we know how December has been. All right. Thank you very much, Torben. That was also very, very clear. A final question from my side, and I know you have spoken a little bit about it, but congratulations on getting the approval for the acquisition of the remaining 55% of the Celebat business. Can you just maybe put a bit more color on how Celebat has performed here in Q3, and then maybe also your thoughts on potential synergies and strategic rationale now that you own the full business prior to owning just 45%? We'll start from behind. The main synergy in this is that a part of the assortment that Celebat is selling is manufactured by us. So the more they can sell, the more revenue we will have from our production companies to Celebat. That is the synergy that is in there. Celebat is also sourcing various products. For example, the just wood assortment, that is a good part of the revenue is sourced. Some of the sliding doors are sourced, etc. There the synergies are less, but again, it makes the full revenue of Celebat and their potential. Of course, the change of management from the previous owner through the last 20 years is a challenge, and we have had a long period of both the old management and the new management in the company. We have tried to—what can you say?—to make a safe and solid handover from the previous owner. But there's always some challenges in regards to that. We are working. From today, when we are now with the approval from the competition authorities, then we are allowed to take active part in the daily management again, and we will do our utmost to continue on the same level and also develop the webshop further. Okay. Thank you very much, Torben. That was all from my side. Thank you. Thank you. 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. We are now going to proceed with our next question. The questions come from the line of Alexander Boreshkov from DNB Carnegie. Please ask your question. Yes. Thank you and good morning. Just a few follow-ups. Do you have a timeline for when you expect to divest the four franchise stores you've now acquired this year? Given that you already have ongoing dialogue with potential owners, should we expect the two new stores that you acquired to be sold faster than the Svane stores that you've now held for almost a year? I think it's a good question. The target is definitely to divest them as fast as absolutely possible. As the Aubo and Netroline stores are smaller stores, it's also a smaller amount that is needed. That could potentially go faster than the Svane stores. I would say when we are here in a year from now, we should either have divested stores or we should be very close to doing so. Okay. That's very clear. And then just a follow-up on Christian's question on Celebat. The $150 million that you mentioned, is that the gross revenue or net revenue impact? Because you do have quite a bit of internal sales, as you mentioned yourself, to Celebat. Yeah. That's the revenue in the webshop. Okay. Got it. More gross than all. Yeah. And just on the new lacquering facility, do you expect that to be fully ramped up for Q4 in terms of gross margin impact, or will it be more of a gradual ramp-up through Q4 and into next year? It should be fully ramped up on gross margin. It's also a part of what you are seeing in Q3. The next big step in utilizing the new facility is to insource the lacquered assortment from Aubo that is, as of today, sourced outside the group. That will happen next year. That will not happen in Q4. Okay. That's very clear. And then just. The gross margin effect on the old business or the TCM businesses is definitely there in Q4. Okay. That's very clear. And then just a follow-up on the B2B part. Because you mentioned the stabilization, but just to be clear, because the order intake has been a bit up and down this year. You had a strong Q1, a soft Q2, and then a strong Q3. So when you mentioned that you're seeing it stabilize, is that at the Q1 and Q3 levels or at the Q2 level? Yeah. Now Q4 is not over yet, and it depends on how things are working. But I think the best way to put it is to say that the project market is still running on a very, very low level and also lower than previous years. The house builders have gained some momentum again, which is good to see. The rest of it is a little bit up and down. It's a little bit like the rest of the market that you have some good weeks and then you have some poor weeks, and then it's fluctuating over the weeks. But when you then look at a quarter as a total, then it looks quite stable, but with a not too big increase, but still positive. Okay. That's clear. And then just a final question from my side on the B2C segment. So in the Q2 report, you flagged that you saw sort of the second half of the quarter had a weaker momentum in B2C while it was still growing. But is that the level you saw continuing in Q3? And I guess so far in Q4, or did it actually rebound from that? It's a little bit like when it was weak in the second half of Q2, it also continued into Q3. But then in the end of Q3, it was up again. The seasonality is a little bit more higher and higher and downs. The holiday period, which is a low season, is getting longer and longer. When the market gains momentum again, then it's higher than it was before, if that makes sense. Yes. That makes perfect sense. Just one follow-up on that. We've seen quite a few of the construction companies in Denmark sort of flag that they're seeing more consumer cautiousness due to weak consumer confidence. Are you seeing any indications of this? Yeah. To a certain extent, but I would also say it in a different way. The housing market in Denmark, the number of houses and apartments sold is increasing month by month with high percentages. Normally, we can see a correlation from houses sold till kitchens sold a few months later. The kitchen market is not as strong as the housing market. So if that means that due to the increased housing prices, they cannot afford to change the kitchen right away, they need to do some savings before, I don't know. But normally, the kitchen sales should follow the number of houses and apartments sold. So if that is still true, then we will see that in the future because we cannot see it. We have not been able to see it in 2025 as strong as normally. That's very clear. That was all for me. Thank you very much. Thank you. We have no further questions at this time, so I will now hand back to you, Mr. Paulin, for closing remarks. Thank you for your time. Thank you for your questions and listening in. Have a nice day. Bye-bye. This concludes today's conference call. Thank you all for participating. You may now disconnect your line. Thank you and have a good rest of your day.