Release Date: August 21, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- TCM Group A/S (OCSE:TCM, Financial) reported a 30% increase in revenue year-on-year for Q2 2024.
- Organic sales growth was 5%, driven by a 25% increase in B2C orders.
- Gross margin improved from 20.2% in Q2 last year to 21.5% in Q2 2024.
- Adjusted EBIT increased to DKK28 million from DKK22 million in Q2 last year.
- Free cash flow significantly improved to DKK26 million from minus DKK2 million in Q2 last year.
Negative Points
- B2B sales declined due to a continued slowdown in the project sales market.
- Adjusted EBIT margin slightly decreased to 8.4% from 8.7% in Q2 last year.
- Net debt increased to DKK326 million from DKK259 million at the end of Q2 last year.
- The leverage ratio rose from 2.8% last year to 3.2% at the end of Q2.
- The company expects the B2B project market to continue declining in the second half of 2024.
Q & A Highlights
Q: On the full year guidance, what factors could lead to achieving the high or low end of the range?
A: (Thomas Hjannung, CFO) To reach the high end, we need continued strong B2C development and a rebound in B2B market activity. The low end reflects concerns about limited B2B project sales and potential weakening in B2C tailwinds.
Q: How do you view the risk of financial troubles for companies in the second half of the year?
A: (Torben Paulin, CEO) With lower activity, more companies could be challenged, but they have had time to adjust capacity and costs. The risk remains similar or slightly lower compared to earlier in the year.
Q: Can you provide more color on the B2C development and differences between segments?
A: (Torben Paulin, CEO) In Q2, all our brands saw positive B2C development. The non-premium segment showed incremental improvement, but monthly variances and campaign impacts play a role. Premium brands have longer lead times, affecting immediate results.
Q: How is the price competition in the B2C market currently?
A: (Torben Paulin, CEO) There is intense price competition, with both brands and individual stores offering significant discounts. This competition is driven by free capacity and the need to secure orders.
Q: What is the current status of the B2B project market and its impact on your business?
A: (Thomas Hjannung, CFO) The B2B project market is still in early stages for new projects. Some projects with shorter lead times could still come in Q4, but overall, the market remains subdued.
Q: How are your stores adapting to the current market conditions, especially those with higher B2B exposure?
A: (Thomas Hjannung, CFO) Stores are focusing more on B2C to generate cash flow. We are coaching them to adjust their cost base and prioritize B2C sales over hoping for a B2B rebound.
Q: Can you explain the provisions for franchisees in the second quarter?
A: (Thomas Hjannung, CFO) Provisions were very low single digits in Q2, similar to Q1 levels.
Q: What is the current B2C share of total sales in Denmark?
A: (Thomas Hjannung, CFO) While we don't give specific numbers, the B2C share is at a record high but still the smaller part of the business compared to B2B.
Q: How do you assess the kitchen market in general, given recent developments?
A: (Torben Paulin, CEO) The B2B market is drying out, but B2C has picked up significantly, driven by lower inflation, energy prices, and salary increases. The private consumer has been the main growth driver in the first half of the year.
Q: How is the Norwegian market performing compared to Denmark?
A: (Torben Paulin, CEO) The Norwegian and Swedish markets are harder hit than Denmark. Despite this, we are still performing well in Norway relative to the market conditions.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
