Good day, and thank you for standing by. Welcome to the TCM Group Interim Q4 2023 report webcast and conference call. 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 will 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 be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Torben Paulin, CEO. Please go ahead, sir.
Thank you very much. Good morning, ladies and gentlemen, and welcome to the presentation of the Q4 results for TCM Group. Presenters today are our CFO, Thomas Hjannung, and myself, CEO Torben Paulin. 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 2 for the business update. As previously stated, sales in Q4 exceeded our expectations due to stronger-than-expected sales in the second half of the quarter. Sales increased by 15% in the quarter with an organic decline of 7.6%. Order intake in Denmark was largely flat compared to last year, but with positive trends on B2C. The improvement in gross margin compared to last year, Q4, was driven by the acquisition of Aubo and the effect of the sales price increases implemented in 2022.
In light of our expectations to the activity level in the coming year, we in November made further adjustments to the cost base, reducing the white-collar workforce with 20 FTEs. We continue to monitor the development in the market closely. Production capacity and the cost base is being adjusted as needed. In light of the market headwinds and considering the acquisition of Aubo, the board of directors has decided not to propose dividend distribution for 2023. At the end of the year, we had 110 branded stores in Denmark and Norway, as two smaller stores closed during the quarter. Please turn to page 3. Some financial headlines for the quarter. Reported revenue was DKK 316 million, corresponding to a revenue increase year-on-year of 15% in our core business on an absolute basis. Adjusted EBIT was DKK 18 million on par with Q4 last year.
Adjusted EBIT margin was 5.6% compared to 6.5% in Q4 last year. Thomas will elaborate on the underlying drivers of this development. Net working capital ratio was -1.4% compared to -4.2% last year. Cash conversion was 37.6%. I will now hand over to Thomas to go through the financial highlights.
Thank you, Torben. Thank you, Torben. Please turn to page 4. In Q4, the reported revenue increased by 15% year-on-year and with an organic decline of 7.6%. The revenue in Aubo Production amounted to DKK 62 million in the quarter. Our revenue in other countries in Q4 2023 was up 157%, driven by the inclusion of Aubo , which has a strong presence in Norway. For the full year, our reported revenue declined by 3% with an organic decline of 13.2%. The B2B share of revenue remained high in the quarter and on par with Q4 last year. Please turn to page 5. The gross margin increased from 19.9% in Q4 last year to 22% in Q4 2023.
The improvement in gross margin was driven by the Aubo acquisition, where it should be noted that Aubo , due to its distribution model, has a different margin structure compared to the other TCM brands. Costs for raw materials and components only decreased slightly in the quarter, and we do experience price stickiness in this area again this quarter. Operating costs were negatively impacted by provisions for potential losses on trade receivables of DKK 5.7 million in the quarter. With the continued weak trading environment in mind, we have decided to increase our provisions for potential losses related to store closings. The Adjusted EBIT ended at DKK 18 million, which was on par with Q4 last year. Please turn to page 6. Net working capital end of Q4 was -DKK 16 million compared to -DKK 48 million last year, which equals 1.4% of revenue compared to 4.2% last year.
During the quarter, inventories at all our sites were reduced as a result of the reduced buffer stocks and improved procurement processes. Trade receivables and other receivables decreased by DKK 34 million in the quarter, while operating liabilities increased by DKK 7 million in the quarter. Net debt was DKK 349 million end of 2023 compared to DKK 288 million end of last year. The leverage ratio increased from 2.35 last year to 4.08, and the group remains compliant with the covenants agreed in our financing agreements. Please turn to page 7. Free cash flow in Q4 was DKK 60 million compared to DKK 52 million last year. The cash operating profit was on par with last year, while the improvement in net working capital was DKK 9 million higher. This was then offset by higher tax payments, whereas our CapEx was on par with last year.
CapEx ratio year to date was 2.8% compared to 3.9% last year, with investments continuing for digitalization and factory modernization. Cash conversion ratio measured over 12 months was 38%. When performing adjusting for the Aubo acquisition, the cash conversion was 105%. I will now hand over to Torben for the financial outlook for 2024.
Please turn to page 8. Our expectations for the development in 2024 are characterized by a high degree of uncertainty with regards to both the macroeconomic development and the geopolitical situation. The effect this uncertainty will have on our consumer confidence in general and the demand for kitchens in particular is difficult to quantify. Market expectations are that inflation will continue to fall and that short-term interest rates will start to decline during 2024, which should support the Danish housing market and thereby the demand for kitchens, especially within B2C sales. However, the timing as to when and by how much short-term interest rates will fall remains highly uncertain, and in addition, the present slowdown in B2B sales seems poised to continue in 2024. And, the TCM Group does not expect the kitchen market in neither Denmark nor Norway to make a speedy recovery in 2024.
Based on these assumptions, the financial outlook for 2024 for the TCM Group contains fairly wide ranges both with respect to sales and earnings in line with last year. Our financial outlook for full-year revenue for 2024 is in the range of DKK 1 billion-DKK 1.15 billion, with earnings adjusted EBIT in the range of DKK 55-DKK 85 million. Please turn to page 9. The key driver for our outlook for 2024 is the sales mix development. We expect improved B2C sales and generally weaker B2B sales, especially within house builders and project sales. With more than 15% of our revenue being generated in Norway, the development in the Norwegian krone plays an important role. Our forecasts are based on a Norwegian krone to DKK rate of 65. Our input cost development is mixed.
We expect costs for raw materials to continue to go down, whereas we currently do not see the same development for components and fittings, etc. Based on the labor agreements, we expect direct wage inflation of around 4%. Logistics cost, which is road transport, is increasing again, and we are therefore working on improving our logistics flow across the group. Our dealers are exposed to the high number of bankruptcies in the Danish building sector. This can put dealerships with high exposure on B2B sales under financial pressure and can lead to dealership closures. We will now hand over to the operator for the Q&A session.
Thank you. To ask a question, you will need to 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. That is star one and one on your telephone keypad if you would like to ask a question. We will now go to your first question. One moment, please. And your first question comes from the line of Ulrik Bak from SEB. Please go ahead.
Yes. Thank you. Hi, Torben and Thomas. A few questions from my side. Firstly, on the guidance assumption, I appreciate that it's a quite wide range, and obviously, there's a lot of uncertainty about the demand picture. But if you can provide any color about the assumption of the upper and lower end, and also if we just look at the demand picture that we see now, if that remains flat throughout the year, where would we be in this guidance range? Just play on that, please.
Yeah. And that is the difficult question, Ulrik. Thank you. The uncertainty is high, and when we look back at the first eight weeks of this year, we've already seen very, very mixed pictures. So I think our conclusion is that the market continues to be very volatile. If we should end in the higher end of the range, then volume should go up, be higher than in the high end of our guidance, and it should then consist both of a high share of B2C sales. But we can only reach the high end if also the B2B sales, including also project sales, is coming through. And that is one of, that is, two of the uncertainties. We know that there has not been issued a lot of building permissions over the last couple of years.
So even that we are still seeing project orders coming in, we don't know exactly when this is going to stop. And the B2B market, B2C market recovered end of 2023 and is also looking better in 2024. But nobody knows whether this is just a normal seasonality and then it will slow down and phase out, or do we see those interest rate cuts that will then support the B2C sales? Just a few months ago, I think there was consensus about the interest rates to come down already early spring. Now, consensus is maybe mid-year. So things are changing all the time. But a healthy mix on B2B and B2C would bring the volume up and give us a positive margin from the mix with more B2C sale is for the high end.
And then the low end, that is if we, as we saw in 2023, we have a high share of project sales with low margin, then we cannot meet the high end of the EBIT guidance. If we have a high share of B2C, we will probably not be able to meet the high end of the revenue, but then margins will be better. So sales mix, and then the other things also mentioned with the input cost, etc., is, of course, also important and the Norwegian krone rate.
All right. Thank you. And then also in terms of the phasing of this guidance, obviously, Q4, you saw an uptick in B2C demand. Is there also something that you talk about a mixed picture here from the first eight weeks of the new year? But if we just look at it on a quarterly basis for Q1 to Q4 2024, what are your thoughts here? Do you expect back-and-loaded impact from positive impact from lower interest rates and thereby also higher demand at that point, or should we see some front-and-loaded demand which flows through from what we saw in Q4? Just any comments on that, please.
It's hard to estimate when the B2B orders potentially will dry out, but it's not the case so far. But now we also had this bankruptcy on Monday that is one of the big builders, and we are also a supplier to several of those projects that are now put on stop. It means that what we had in our books for first quarter will not be delivered in the first quarter, question mark, if it will be in the second quarter or later. So just from Friday last week till Monday this week, it's a huge change and impact on how the quarters will look like.
Understood. Then you talked about you had a point with restructuring costs for dealerships. So what are you thinking about 2024? Also, what you have made some provisions for the loss on receivables, but also how does that look in 2024? First question on provisions and second one on restructuring, please.
Yeah. Well, as we stated, we increased our provisions and also had some realized losses in Q4 in connection with some specific store closures, right? We, of course, believe that we have been prudent in our view end of 2023 on stores that could potentially close. But as Torben just mentioned, when some of these big project developers suddenly are out of the game, this can impact some of our dealers who are exposed and who were in a good position end of 2023. Their situation might change during the year. So it's very hard to predict this. However, I mean, our guidance do include, of course, that we have included some provisions for dealership closures or restructurings in the 2024 guidance, I would say a low single-digit amount in Danish kroner.
Understood. Understood. Yeah. Thank you so much. I have no further questions at this point. Thank you.
Thank you, Ulrik.
Thank you. Once again, if you would like to ask a question, please press star one and one on your telephone keypad. That is star one and one on your telephone keypad. Thank you. There are currently no further questions. I will hand the call back to you.
Thank you very much. Thank you, everybody, for listening in today and asking questions. This concludes our session for today. Have a nice day.
Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.