TCM Group

TCM-GROUP - 2023 TCM Group A/SSkautrupvej167500Holstebro37291269529900P5DOKT3XLWL4802023-01-012023-12-312022-01-012022-12-31https://investor-dk.tcmgroup.dk/da/CorporateGovernancehttp://investor-en.tcmgroup.dk/CorporateGovernance

Statement of target figures and policies for the underrepresented gender

A talented and diverse workforce

Social data Diversity
At TCM Group we are convinced that a diverse and
inclusive work environment will benefit society. Our
approach is defined in our diversity and inclusion policy.
The current composition reflects the traditional gender
distribution within manufacturing companies, where
there is a predominance of male foremen in production,
and at the administrative level, a slight predominance of
female employees.
The development in 2023 has been very much affected
by the inclusion of AUBO Production to TCM Group. With
a reduction in employees as a result of capacity adjust-
ments and the addition of AUBO Production the total
number of employees is slightly higher than 2022.
The inclusion of AUBO Production has also introduced a
considerable increase in the number of flex jobs as well as
trainees or similar positions. This reflects the long-term
commitment to diversity at AUBO.
		Gender diversity overall has decreased a little, while
		gender diversity at other management levels has
		gone up.
		At TCM Group it is our policy that equal jobs are
		rewarded with equal pay. Any difference in pay is solely
		based on qualifications and experience.
		Accounting practices
		FTE and the shares of respectively blue- and white-
		collar workers are calculated excluding temporary and
		short-term employments.
		The number of employees who are respectively on flex
		job contracts or similar and trainee contracts are
		counted at the end of the year.
		Gender diversity Executive management is defined as
		CEO and CFO as they have direct reporting line to the
		board of directors.
					Gender diversity Seond management level is manage-
					ment in direct reporting to the executive management.
					Gender diversity other management levels is the com-
					plete management group at TCM incl executive mgmt
					and second management level
					The gender diversity is measured with reference to GRI
					404 Diversity and Equal Opportunity and includes all
					TCM Group employees.
					Gender diversity measured for other management levels
					includes executive mgmt. and mgmt. group.
					The pay gap between gender is measured white collar
					employees minus executive management.
					Our work with diversity aligns with
					UNGC principles 3,4,5 and 6.
	unit	2023	2022	2021	2020	2019	Reference report page
Diversity							page 23-24
Full-time employees, end of the period	#FTE	415	482	504	483	489
Blue collar workers	%	70%	77%	-	-	-
White collar workers	%	30%	23%	-	-	-
Flex jobs etc.	#	21	5	-	-	-
Trainees, interns, apprentices	#	12	6	13	16	17
Gender diversity overall	%	34%	36%	32%	-	-
Gender diversity, 1st level management as		0 %
per §99b	%	(0 of 2)	-	-	-	-
Gender diversity, 2nd level management		44%
as per §99b	%	(4 of 9)	-	-	-	-
Gender diversity, other management levels		31%	28%	21%	26%	20%
including 1st and 2nd level	%	(5 of 16)	(4 of 14)	(3 of 14)	(4 of 15)	(2 of 10)
Pay gap between genders, white collar	Ratio m/f	1,28	1,18	-	-	-

COMPOSITION OF BOARD OF DIRECTORS

Information on equal distribution of women and men [Other management levels]

		We seek to promote diversity and achieve sensible
		gender diversity in both the Board of directors and
		the Executive Management and other management
		levels. TCM Group aims for a gender composition
		in the rest of management as well as in the total
		workforce, where the underrepresented gender
		makes up at least 40% in line with the objective for
		the composition of the board of directors (see
		governance section page 31).
		The executive management consists of the CEO
		and CFO who are both male, but including second
		management level the underrepresented gender
		makes up for 44%. For the complete management
			group the underrepresented gender makes up for
			31%. The current composition reflects the
			traditional gender distribution within
			manufacturing companies, where there is a
			predominance of male foremen in production,
			and at the administrative level, a slight
			predominance of female employees. During 2023
			new competences from both gender has been
			added to the management group. Development
			towards a more equal gender distribution in other
			management levels will happen gradually in
			connection with organisation development and
			recruitment.We seek to meet of target by 2029.
			Compensation
			At TCM Group it is our policy that equal jobs are
			rewarded with equal pay. Any difference in pay is
			solely based on qualifications and experience
			(please see page 83).

Information on exempt from providing information on target figures of underrepresented gender for other management levels due to the number of employees

Statement of the policy to increase the percentage of underrepresented gender [Other management levels]

445Regnskabsklasse DÅrsrapport37291269TCM Group A/SSkautrupvej 167500 HolstedbroxWizard version 1.1.1252.2, by EasyX Aps. www.easyx.euRevisionspåtegningGrundlag for konklusionKonklusionhttps://investor-dk.tcmgroup.dk/da/CorporateGovernance70.4390.440.460.1750.250.250.24963377123133771231529900P5DOKT3XLWL4802023-01-012023-12-31cmn:ConsolidatedMember529900P5DOKT3XLWL4802023-12-31cmn:ConsolidatedMember529900P5DOKT3XLWL4802022-12-31cmn:ConsolidatedMember529900P5DOKT3XLWL4802021-12-31cmn:ConsolidatedMember529900P5DOKT3XLWL4802020-12-31cmn:ConsolidatedMember529900P5DOKT3XLWL4802019-12-31cmn:ConsolidatedMember529900P5DOKT3XLWL4802022-01-012022-12-31cmn:ConsolidatedMember529900P5DOKT3XLWL4802023-01-012023-12-31529900P5DOKT3XLWL4802022-01-012022-12-31529900P5DOKT3XLWL4802023-12-31529900P5DOKT3XLWL4802022-12-31529900P5DOKT3XLWL4802022-12-31ifrs-full:EquityAttributableToOwnersOfParentMember529900P5DOKT3XLWL4802022-12-31ifrs-full:IssuedCapitalMember529900P5DOKT3XLWL4802022-12-31ifrs-full:SharePremiumMember529900P5DOKT3XLWL4802022-12-31ifrs-full:TreasurySharesMember529900P5DOKT3XLWL4802022-12-31ifrs-full:ReserveOfCashFlowHedgesMember529900P5DOKT3XLWL4802022-12-31ifrs-full:RetainedEarningsMember529900P5DOKT3XLWL4802022-12-31tcm-group:DividendForTheYear529900P5DOKT3XLWL4802023-01-012023-12-31ifrs-full:EquityAttributableToOwnersOfParentMember529900P5DOKT3XLWL4802023-01-012023-12-31ifrs-full:IssuedCapitalMember529900P5DOKT3XLWL4802023-01-012023-12-31ifrs-full:SharePremiumMember529900P5DOKT3XLWL4802023-01-012023-12-31ifrs-full:TreasurySharesMember529900P5DOKT3XLWL4802023-01-012023-12-31ifrs-full:ReserveOfCashFlowHedgesMember529900P5DOKT3XLWL4802023-01-012023-12-31ifrs-full:RetainedEarningsMember529900P5DOKT3XLWL4802023-01-012023-12-31tcm-group:DividendForTheYear529900P5DOKT3XLWL4802023-12-31ifrs-full:EquityAttributableToOwnersOfParentMember529900P5DOKT3XLWL4802023-12-31ifrs-full:IssuedCapitalMember529900P5DOKT3XLWL4802023-12-31ifrs-full:SharePremiumMember529900P5DOKT3XLWL4802023-12-31ifrs-full:TreasurySharesMember529900P5DOKT3XLWL4802023-12-31ifrs-full:ReserveOfCashFlowHedgesMember529900P5DOKT3XLWL4802023-12-31ifrs-full:RetainedEarningsMember529900P5DOKT3XLWL4802023-12-31tcm-group:DividendForTheYear529900P5DOKT3XLWL4802021-12-31ifrs-full:EquityAttributableToOwnersOfParentMember529900P5DOKT3XLWL4802021-12-31ifrs-full:IssuedCapitalMember529900P5DOKT3XLWL4802021-12-31ifrs-full:SharePremiumMember529900P5DOKT3XLWL4802021-12-31ifrs-full:TreasurySharesMember529900P5DOKT3XLWL4802021-12-31ifrs-full:ReserveOfCashFlowHedgesMember529900P5DOKT3XLWL4802021-12-31ifrs-full:RetainedEarningsMember529900P5DOKT3XLWL4802021-12-31tcm-group:DividendForTheYear529900P5DOKT3XLWL4802022-01-012022-12-31ifrs-full:EquityAttributableToOwnersOfParentMember529900P5DOKT3XLWL4802022-01-012022-12-31ifrs-full:IssuedCapitalMember529900P5DOKT3XLWL4802022-01-012022-12-31ifrs-full:SharePremiumMember529900P5DOKT3XLWL4802022-01-012022-12-31ifrs-full:TreasurySharesMember529900P5DOKT3XLWL4802022-01-012022-12-31ifrs-full:ReserveOfCashFlowHedgesMember529900P5DOKT3XLWL4802022-01-012022-12-31ifrs-full:RetainedEarningsMember529900P5DOKT3XLWL4802022-01-012022-12-31tcm-group:DividendForTheYear529900P5DOKT3XLWL4802022-12-31ifrs-full:EquityAttributableToOwnersOfParentMember529900P5DOKT3XLWL4802022-12-31ifrs-full:IssuedCapitalMember529900P5DOKT3XLWL4802022-12-31ifrs-full:SharePremiumMember529900P5DOKT3XLWL4802022-12-31ifrs-full:TreasurySharesMember529900P5DOKT3XLWL4802022-12-31ifrs-full:ReserveOfCashFlowHedgesMember529900P5DOKT3XLWL4802022-12-31ifrs-full:RetainedEarningsMember529900P5DOKT3XLWL4802022-12-31tcm-group:DividendForTheYear529900P5DOKT3XLWL4802022-12-31529900P5DOKT3XLWL4802021-12-31529900P5DOKT3XLWL4802023-01-012023-12-31cmn:ConsolidatedMember0529900P5DOKT3XLWL4802023-01-012023-12-31cmn:ConsolidatedMember1529900P5DOKT3XLWL4802023-01-012023-12-31cmn:ConsolidatedMember0529900P5DOKT3XLWL4802023-01-012023-12-31cmn:ConsolidatedMember1529900P5DOKT3XLWL4802023-01-012023-12-31cmn:ConsolidatedMember2529900P5DOKT3XLWL4802023-01-012023-12-31cmn:ConsolidatedMember3529900P5DOKT3XLWL4802023-01-012023-12-31cmn:ConsolidatedMember4529900P5DOKT3XLWL4802023-01-012023-12-31cmn:ConsolidatedMember5529900P5DOKT3XLWL4802023-01-012023-12-31cmn:ConsolidatedMember6529900P5DOKT3XLWL4802023-01-012023-12-31cmn:ConsolidatedMember0529900P5DOKT3XLWL4802023-01-012023-12-31cmn:ConsolidatedMember1xbrli:pureiso4217:DKKiso4217:DKKxbrli:shares Annual report 2023 TCM Group A/S, Skautrupvej 16, DK-Holstebro, Denmark, CVR Nr. 37291269 At A Glance Our business Perfomance Highlights ESG Corporate governance Financial statements ESG Statements TCM Group Annual report 2023 2 Our purpose Our overall purpose is to create a better home life for everyone. Regardless of family constellation’s, housing type and financial situation. We create better kitchen environments for the heart of your home We want to be a contributor to our customer’s everyday happiness, and we do so by working together across teams and organizations, always with the customer in focus. Svane Køkkenet Snedker RAW S12 Limited Edition Front page photo At A Glance Our business Perfomance Highlights ESG Corporate governance Financial statements ESG Statements TCM Group Annual report 2023 3 02 management report 36 financial statements 75 Statements 04 At a glance 37 consolidated financial statements 75 Statement by Management on the annual report 05 Letter to our shareholders 06 About TCM Group 07 Key ﬁgures and ratios 08 How we create value 38 Income statement 38 Statement of comprehensive income 39 Balance sheet as of 31 December 40 Statement of changes in equity 75 Independent auditor’s reporTs 09 our business 41 Cash ﬂow statement 11 Strategy and ﬁnancial targets Danish design and Danish production Risk management 42 Notes to the ﬁnancial statement 66 Deﬁnitions 12 13 79 ESG Statements 67 Financial statements of The Parent company 16 Perfomance Highlights 79 ESG Statements 17 18 19 Financial & non-ﬁnancial highlights Business review Financial review 68 Income statement 81 Enviromental data 68 Statement of comprehensive income 68 Balance sheet as of 31 December 69 Changes in shareholders´s equity 70 Cash ﬂow statement 83 Social data 85 Governance data 21 ESG review 23 ESG strategy and approach 23 A sustainable work life 25 We take responsibility 26 New ways ahead 70 Notes to the parent ﬁnancial statements 27 Together we improve 28 CoRporate governance 32 Board of Directors 33 Executive Management 34 Shareholder information At A Glance Our business Perfomance Highlights ESG Corporate governance Financial statements ESG Statements TCM Group Annual report 2023 4 At Svane Køkkenet, we are driven by innovation. We are constantly challenging the established by curiously going new ways. We rethink expressions and materials. This is how we create modern living spaces that add tranquility, energy and luxury to everyday life. Notes Gold At A Glance At A Glance Our business Perfomance Highlights ESG Corporate governance Financial statements ESG Statements TCM Group Annual report 2023 5 The lower sales combined with high provisions for dealership restructurings had a signiﬁcant adverse inﬂuence on the earnings in the TCM Group in 2023. continued investments in the store network despite short-term economic headwinds. 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 seem poised to continue well into 2024. In view of this TCM Group does not expect the kitchen market in neither Denmark nor Norway to make a speedy recovery in 2024. Letter to our Shareholders We also continued our investments in production facilities and production equipment so that the business is well-positioned for growth once the kitchen market returns to normal. Investments in new production equipment is focused on equipment that provides increased ﬂexibility, eﬃciency, and lower energy consumption. Digitalization is also a top priority with the aim to gain operational eﬃciencies and at the same time improve our collaboration with customers and partners. In 2023 we therefore completed a thorough analysis of our future requirements for a new ERP-platform, and we will start to build the new platform in 2024. We launched new or updated product ranges in all brands during the year, each of them matching the distinct identity of each brand. Amongst others, Svane Køkkenet launched 17 contemporary colors available across 6 design series and Tvis Køkken launched the MG30 series. 2023 proved to be just as volatile and challenging as we expected it to be. High inﬂation and increasing interest rates continued to decrease the demand for kitchens within both B2C and B2B across all our brands and markets. Based on the above, 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 1,000-1,150 million with earnings (adjusted EBIT) in the range of DKK 55-85 million. Given the backdrop of a continued slowdown in the Danish housing market during 2023, with sales of properties down by more than 35% compared to 2021, it is not surprising that also the market for kitchens was hit hard in 2023. On that basis we consider the organic decline in our core business in Denmark of -14% as in line with the market development. Even in a contracting market we continued to invest in improving the customer experience through introduction of new and innovative customer journeys, store refurbishments, and improved on-line experiences. In June 2023 we announced the acquisition of AUBO Production A/S. The strategic acquisition further strengthened TCM Group’s foothold in Denmark and Norway in particular, adding 22 branded AUBO stores in Denmark and 55 shop- in-shops in Norway to the distribution network. The acquisition supports the Groups strategic goal to expand in Norway organically or through M&A activity as outlined since the IPO in 2017. To reﬂect the lower demand, we during the year adjusted our production capacity, organization and cost-base and thus, once again, Finally, we would like to thank our employees and business partners for their dedicated eﬀorts during a year with many challenges. demonstrated our ability to protect the business against the headwinds. Considering these short- term headwinds, and to consolidate the business following the strategic acquisition of AUBO Production A/S, the Board of Directors has decided not to propose a distribution of an ordinary dividend for 2023. In connection with the acquisition of AUBO Production A/S we launched a directed share issue raising DKK 78.8 million in new equity. The share issue was fully subscribed for by existing shareholders, and we thank the shareholders for the strong support and conﬁdence in TCM Group. In 2023 TCM Group continued to beneﬁt from our strong position in the B2B market, as B2C demand remained subdued especially in the ﬁrst three quarters of the year. During this period the strong B2B pipeline supported the business. During 2023 we continued the important work of reducing our CO2 emissions, and we are pleased to report that our Scope 1 and Scope 2 emissions have been reduced by 36% compared to 2022. This important work continues, and The integration of AUBO Production into the TCM Group has been executed as planned and has already provided tangible synergies to the Group, which are expected to increase in the coming years as the integration of the businesses increases. We would like to thank all the employees in both AUBO and TCM Group, who have been involved in the integration-process, for their commitment to prioritizing the interest of the combined businesses. we are fully committed to achieve a CO2 neutral production by 2028 (scope 1 and 2). Even in a contracting market we continued to invest in improving the customer experience. For TCM, expectations for the development in 2024 are characterized by a high degree of uncertainty with regards to both the macro- economic development and the geopolitical situation. Market expectations are that inﬂation will continue to fall, and that short term interest rates will start to decline in 2024, which should support the Danish housing market and thereby Despite the headwinds we opened two new stores during the year, one in Tvis Køkken and one in AUBO. Both stores are placed in key locations in Denmark and underlines our commitment to Sanna Mari Torben Paulin CEO Suvanto-Harsaae Chairman * B2C comprise sales where the stores contract directly with the private end customers, B2B comprise sales where the stores contract with professional customers, e.g. house builders and project developers. ** Organic is excl. the impact of the acquistion of AUBO Production A/S At A Glance Our business Perfomance Highlights ESG Corporate governance Financial statements ESG Statements TCM Group Annual report 2023 6 Revenue, DKK Revenue Adjusted EBIT Margin About TCM Group Denmark 85% (90) N14or%wa(y9) O1%the(r1c)ountries 1,111 5.0 Mi0. % TCM Group is Scandinavia’s third largest kitchen manufacturer, with headquarter in Denmark and selling through approximately 220 stores across Scandinavia. The majority of our business is concentrated in Denmark with Norway being the primary export market. The product oﬀering includes kitchens, bathroom furniture and storage solutions. (1,146) (9.0) Manufacturing is to a large extent carried out in-house at four manufacturing sites located in Tvis and Aulum (in the western part of Denmark). 220 Stores across Scandinavia TCM Group pursues a multi-brand strategy, under which the main brand is Svane Køkkenet and the other brands are Tvis køkken, Nettoline, AUBO and private label. Combined, the brands cover the entire price spectrum. Products are mainly marketed through a network of franchise stores and independent kitchen retailers. Denmark Norway Sweden Iceland Faroe Islands Production Furthermore, TCM Group is supplier to the 45% owned e-commerce kitchen business Celebert, which operates under the brands kitchn.dk, billigskabe.dk, Celebert and Just Wood. TCM Group is listed on Nasdaq Copenhagen. E-COMMERCE IN CELEBERT * AUBO Production A/S is included in the consolidated ﬁgures as of 3 July 2023 At A Glance Our business Perfomance Highlights ESG Corporate governance Financial statements ESG Statements TCM Group Annual report 2023 7 Key figures and ratios DKK’000 2023 2022 2021 2020 2019 DKK’000 2023 2022 2021 2020 2019 Income statement Revenue Growth ratios 1,111,346 1,146,052 1,108,274 1,024,588 1,006,942 Revenue growth, % -3.0% -5.3% 3.4% -8.6% 8.2% -6.9% -1.4% 2.8% 1.8% -2.5% -9.0% -8.1% -8.2% 11.9% 6.4% 9.6% 6.1% 7.3% Gross proﬁt 218,331 230,649 252,237 270,805 277,771 Gross proﬁt growth, % Adjusted EBIT growth, % EBIT growth, % -46.2% -52.7% -69.5% -24.9% -30.0% -36.3% Earnings before interest. tax. depreciation and amortisation (EBITDA) 77,367 85,271 52,272 114,864 121,342 96,913 155,365 154,674 139,707 156,058 161,058 142,277 167,387 174,399 154,118 Adjusted EBITDA Net proﬁt growth, % 8.3% Earnings before interest. tax and amortisation (EBITA) Margins Operating proﬁt before non-recurring items 55,610 45,795 -20,897 27,092 21,522 103,391 96,913 -8,809 89,401 70,492 137,756 138,447 -3,262 135,738 110,709 139,717 134,717 -3,997 130,720 102,243 153,570 146,558 -4,201 (Adjusted EBIT) Gross margin, % 19.6% 7.7% 5.0% 4.1% 20.1% 10.6% 9.0% 8.5% 22.8% 14.0% 12.4% 12.5% 26.4% 15.7% 13.6% 13.1% 27.6% 17.3% 15.3% 14.6% Operating proﬁt (EBIT) Adjusted EBITDA margin, % Adjusted EBIT margin, % EBIT margin, % Financial items Proﬁt before tax 142,357 111,322 Net proﬁt for the year Other ratios Balance sheet Solvency ratio, % 44.1% 4.08 43.4% 2.35 46.3% 1.33 61.8% -0.23 51.9% 0.31 Total assets 1,200,873 -16,009 349,312 529,653 970,227 -47,630 288,112 420,629 907,321 -81,649 199,461 419,691 929,451 -116,978 -42,873 574,373 911,096 -108,868 51,702 Leverage ratio Net working capital Net interest-bearing debt (NIBD) Equity NWC ratio, % -1.4% 1.9% -4.2% 2.0% -7.4% 2.6% -11.4% 3.0% -10.8% 1.5% Capex ratio excl. acquisitions, % 472,744 Cash Flow Share information Operating cash ﬂow before acquisitions of 39,954 21,621 37.6% 39,478 22,696 53.3% 44,462 29,168 58.3% 101,048 30,993 85.8% 132,326 14,996 99.9% Number of outstanding shares 10,438,638 9,767,408 75,000 2.20 9,067,294 9,074,847 75,000 7.77 9,174,073 10,000,000 10,000,000 9,584,933 10,000,000 10,000,000 operations Capex excl. acquisitions Weighted average number of outstanding shares Number of treasury shares Cash conversion, % 825,927 11.55 0 10.22 10.22 0 11.13 11.13 Earnings per share before dilution, DKK Earnings per share after dilution, DKK * AUBO Production A/S is included in the consolidaded ﬁgures as of 3 July 2023 - see note 26. 2.20 7.76 11.54 Reference is made to description in note 1 Accounting policies. Reference to deﬁnitions of Key ﬁgures and ratios - see page 66 At A Glance Our business Perfomance Highlights ESG Corporate governance Financial statements ESG Statements TCM Group Annual report 2023 8 how we our business model create value Our business model TCM Group is Scandinavia’s third largest kitchen manufacturer, with headquarter in Denmark and selling through approximately 220 stores across Scandinavia, herof 110 branded stores. Product development All products are Danish design, rooted in a proud tradition of good quality and good craftmanship. TCM Group has in-house architects and a research and development center and rely on strong partnerships with external partners, designers and subject-matter experts. Product development Sourcing Production of raw materials Transport of raw materials Sourcing and production Manufacturing is to a large extent carried out in-house at our four manufacturing sites located in Denmark. Our focus is a local supply chain, and more than 90% of our direct materials are sourced in Europe. Waste and recycling Customer / Sales We sell the main part of our products through approx. 110 branded stores across Scandinavia to thousands of diﬀerent customers. Cooperation and working towards the common goal of providing excellent service to the consumers is the key to our success. Transport We rely on local distributers to ensure focus on end- to-end deliveries to the end-customer. Use Transport Sales Manufacture Consumers We provide durable products that are built to last. It is our product strategy to ensure that the products that we oﬀer, contribute to a healthy indoor environment and can be upgraded and renewed to extend their life. We work with circular design principles to ensure that once our products no longer can be used in their current form, they can recycled into new products. At A Glance Our business Perfomance Highlights ESG Corporate governance Financial statements ESG Statements TCM Group Annual report 2023 9 Nettoline kitchens are made for everyday life. Our kitchens are created for the user – not the other way around. Our kitchens are born out of the idea that functionality, design, and price are not opposites. TREND Grå Our Business At A Glance Our business Perfomance Highlights ESG Corporate governance Financial statements ESG Statements TCM Group Annual report 2023 10 We will be the customers’ first choice of kitchens We create better kitchen environments for the heart of your home Strengthen the value chain through continuous improvement Friendly and professional customer service throughout the value chain Aim for double-digit annual Agile and ﬂexible supply chain Responsibility for people, planet and products Strategic revenue growth Choices Realize the potential Create capacity through simpliﬁcation Develop competencies and resources Quality in everything we do New customer service concept Strategic in Norway Initiatives Invest in eﬃcient production facilities A proactive and result-oriented mindset Brand and product development Increase digitalization Enablers Ambition - Team Spirit - Pride Values At A Glance Our business Perfomance Highlights ESG Corporate governance Financial statements ESG Statements TCM Group Annual report 2023 11 still room for growing market share, both within the B2C and the B2B segments. In recent years we have focused on the B2B segment with the ambition to gain further market share as a contributor to growth in revenue and earnings. Furthermore, the B2B segment has a diﬀerent cycle compared to the B2C segment a.o. including a pipeline with a longer time horizon. During 2023 the strategy again proved to be right as we saw a slowdown in both the B2C and B2B segments, however the B2B pipeline build in 2022 supported the business, while the cost base was adjusted to the lower demand. To further strengthen the distribution network in the B2B segment, we have in cooperation with multi store franchisees, strengthened the B2B competences in the three biggest cities in Denmark in recent years. in 2023, and further openings are planned for 2024. In Norway focus is on increasing same store sale within both B2B and B2C as only a few white spots remain. Financial outlook 2024 For TCM Group, expectations for the development in 2024 are characterized by a high degree of uncertainty with regards to both the macro-economic development and the geopolitical situation. The eﬀect this uncertainty will have on consumer conﬁdence in general, and the demand for kitchens in particular is diﬃcult to quantify. Strategy NETTOLINE and financial targets The Nettoline brand is selling through single brand stores in Denmark and multibrand stores in Norway. In both markets there are room for additional stores, which will grow the brand awareness and turnover. The cooperation with private labels clients will continue as seen in the recent years. Market expectations are that inﬂation will continue to fall, and that short term interest rates will start to decline in 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 seem poised to continue well into 2024. In view of this TCM Group does not expect the kitchen market in neither Denmark nor Norway to make a speedy recovery in 2024. Even though we invest in growth, our target is to remain in the top tier of the kitchen industry with regards to profitability and cash flow. E-COMMERCE The online activity with brands kitchn.dk, billigskabe.dk, Celebert and Just Wood is expected to continue to gain a greater share of the kitchen market in Denmark and Norway. At the same time we plan to continue the geographical expansion, starting with Germany in 2024. From 2024 TCM Group will change the classiﬁcation of certain income types from Revenue to a reduction in Cost of Goods Sold. The change in classiﬁcation will reduce the revenue in the range of DKK 20-25 million annually. Comparative ﬁgures in 2024 ﬁnancial reports will be restated accordingly. For Svane Køkkenet in Norway, the mid-term target is to open another 6-8 stores, and thereby to bring the store network up to 18-20 stores. However due to the economic slowdown store openings were put on hold in 2023, and one store closed in late 2023. We will revisit the growth plans for Svane Køkkenet in Norway during 2024 in preparation for the expected recovery of the kitchen market. Group To extend the diﬀerent positionings of our brands and being our customers’ ﬁrst choice for the heart of their homes, we will continue to develop new, exciting, and sustainable kitchen, bath and storage solutions, designs and functionalities. Strategy TCM Group estimates revenue for the ﬁnancial year 2024 to be in the range DKK 1,000-1,150 million TCM Group’s overall strategy is to aim for double-digit annual growth rates in the short- to mid-term. This means that we aim for growth in all brands, markets and channels. Even though we invest in growth, our target is to remain in the top tier of the kitchen industry with regards to proﬁtability and cash ﬂow. This will be achieved through investments and optimization in our production and supply chain setup. In addition to organic growth, the Group is monitoring the market for acquisition opportunities primarily in Scandinavia, which resulted in the acquisition of AUBO Production A/S in 2023. The acquisition supports our growth strategy in Norway, substantially improving the foothold in Norway , without creating a conﬂict with our distribution of Svane Køkkenet and Nettoline. TVIS KØKKEN To support the growth ambitions in all brands and markets, we continue to invest in ﬂexibility at our four factories, while also supporting our long-term growth ambitions. We will invest in further digitalizing processes in the supply chain, in the administration and in the retail network, and thereby continuously improve and EBIT is estimated to be in the range The Tvis Køkken brand has opened and relocated several stores in the past years, but there are still a few white spots in Denmark to be addressed. Market share and brand awareness is to be increased in line with the development of the store network. In 2023 we opened a new store in a key shopping area outside Copenhagen, and launched the MG30 line designed by Morten Georgsen. DKK 55-85 million EBIT excluding non-recurring items Forward looking statements This report contains statements relating to the future, including statements regarding TCM Group’s future operating results, ﬁnancial position, cash ﬂows, business strategy and plans for the future. The statements are based on management’s reasonable expectations and forecasts at the time of the disclosure of the report. Any such statements are subject to risks and uncertainties, and a number of diﬀerent factors, many of which are beyond TCM Group’s control, could mean that actual performance and actual results will diﬀer signiﬁcantly from the expectations expressed in this annual report. Without being exhaustive, such factors include general economic and commercial factors, including market and competitive matters, supplier issues and ﬁnancial issues. strengthen the entire value chain of our business. In all we do, we are determined to do this as responsible as possible with regards to people, planet, and products. We refer to the separate ESG section for further elaboration of our strategic targets and initiatives. AUBO The AUBO brand is selling through single brand stores in Denmark and in Norway through dedicated shop-in-shops operated by the leading building materials distributor, Optimera. In Denmark one store opened in Southeast Jutland SVANE KØKKENET The Svane Køkkenet branded store network is fully established in Denmark, however there is At A Glance Our business Perfomance Highlights ESG Corporate governance Financial statements ESG Statements TCM Group Annual report 2023 12 Store openings Aulum Danish design and danish 2023 production sites Tvis Total store openings TCM Group’s production sites are located in Tvis and Aulum, with two factories in Tvis and two factories in Aulum. production 2 branded stores 0 Svane Køkkenet Tvis Køkken (branded stores include Svane Køkkenet, Tvis Køkken, AUBO and Danish Nettoline stores) 1 0 Nettoline AUBO 1 31 December 2023 110 Storage solutions e.g. sliding doors Products production In denmark This ensures that we can oﬀer customized kitchens with a wide selection of designs, colors and functions Table tops Denmark Norway Denmark Norway 220 Stores across Scandinavia Cabinets Fronts Faroe Islands E-COMMERCE IN CELEBERT Denmark Norway Sweden Germany Denmark Norway Denmark Norway Sweden Iceland Iceland Faroe Islands Faroe Islands At A Glance Our business Perfomance Highlights ESG Corporate governance Financial statements ESG Statements TCM Group Annual report 2023 13 risk Svane Køkkenet management RETRO Risk management is an integral part of the management process at TCM Group. The objective is to limit uncertainties and risks with respect to the deﬁned ﬁnancial targets and strategic objectives for the Group Management performs a yearly assessment of business risks. A follow-up process has been established with the purpose of describing and evaluating a variety of business risks within the Group and implementing procedures to ensure risk mitigation. This assessment is discussed and evaluated by the Board of Directors once a year. eﬀectively minimize the risk of errors and omissions in the ﬁnancial reporting. The Executive Management is responsible for ensuring that risks are continuously identiﬁed, evaluated and mitigated in order to reduce the economic impact and/or likelihood of risks being realized. Besides this yearly assessment, the Board of Directors and the Executive Management have a continuous dialogue regarding signiﬁcant risks with potential material impact on the Group. On the next pages are the main identiﬁed business and ﬁnancial risks as well as comments on the actions undertaken within the individual areas. The risk management, including internal controls in the ﬁnancial reporting process, is designed to Ongoing process Identify Evaluation Risk management Risk response and reporting Risk map or catalogue Classiﬁcation of risk type Estimate the probability of occurrence Assesment of risk impact Planning At A Glance Our business Perfomance Highlights ESG Corporate governance Financial statements ESG Statements TCM Group Annual report 2023 14 Business Risks Risk area Description Management The Group is exposed to general macro economic trends and ﬂuctuations. Speciﬁcally the development in the Danish and Norwegian housing market is an important factor for the Groups revenue and ﬁnancial position. The majority of the Groups products are made to order, which combined with a high degree of ﬂexibility in the workforce, means that the Group can respond quickly changes in market demand. Market risks The Group considers the Svane Køkkenet, Tvis Køkken, Nettoline and AUBO brands to be some of the most important assets of the business. The reputation of the Group’s brands is important for the attractiveness and customer appeal. Accordingly, the Group’s brand reputation is important for sustaining and growing the Group’s revenue and proﬁtability. The Group monitors customer satisfaction at brand and store level, and takes appropriate action when there are deviations to the targeted levels. This combined with high standards quality and delivery performance is managements proactive means to protect the brand repuation. Brands, trademarks and releveant design rights are registered in the main markets in which the Groups products are sold. Reputational risks The Group is exposed to risks of loosing customers, e.g. due to ﬁnancial diﬃculties or due to The Group’s customer risks relate primarily to the sales development of the stores, with sales being distributed through 110 Branded stores. The debtor risk related to the stores represents the main ﬁnancial risk and is closely monitored to reduce risk of losses by primarily requiring appropriate collateral for current trading. Customer risks preference for other brands. Access to sustainable sources of raw materials is crucial. The raw materials used by the Group include wood, steel, aluminium and plastics. Changes in costs for components (such as handles, worktops and hinges) and goods for resale (such as appliances) are mainly caused by changes in prices of raw materials and the competitive landscape. Disruptions to deliveries of raw materials and components may result in disruptions to deliveries of ﬁnished goods, which may in turn result in higher costs, lost income and dissatisﬁed customers. The Group aims to have multiple suppliers in each raw material and component category in order to improve commercial terms as well as to ensure adequate supply. Eﬃciency improvements, changed product speciﬁcations and sales price increases are examples of measures to reduce the eﬀect of rising costs for raw materials and components. Raw material purchasing risks The Group is exposed to risks of not being able to fulﬁll customer orders e.g., due to ﬁre, Fire prevention is a management priority and is carried out in cooperation with our insurance company. We have our own maintenance department which in cooperation with external experts conduct the necessary machine maintenance and repairs. During 2023 we performed extensive maintance and upgrades to criticial production lines, extending the useful life by several years. Production risks machine failure or lack of personnel. Finally, we have a constructive cooperation with our production employees typically based on multi-year collective wage negotiation agreements. The Group relies on IT systems in its day-to-day operations. Disruptions or faults in critical production systems have a direct negative impact. Errors in the handling of ﬁnancial systems can aﬀect the company’s reporting of results. The Group has its own IT system, which is regularly maintained and updated. IT security is a top Group priority. We work with external experts to achieve a level of security appropriate for the Group. Risk related to IT Through the manufacturing activities at the Groups four production sites employees are exposed to working hazards, and waste from the production processes can contaminate the environment. Optimizing occupational health conditions and preventing both internal and external contamination are important focus areas at TCM Group’s production sites. The Group has a registration system for occupational accidents and near miss accidents focusing on the prevention of future incidents. An occupational health organization with participation from management and employee representatives is established and well functioning. Risk related to pollution and occupational health The Group is insured against signiﬁcant damage to property, plant and equipment and is in close dialogue with authorities and insurance companies with a view to further improving the mitigation of risks related to, inter alia, ﬁre and pollution. At A Glance Our business Perfomance Highlights ESG Corporate governance Financial statements ESG Statements TCM Group Annual report 2023 15 Financial Risks Risk area Description Management Liquidity risk pertains to the Group's ability to provide the necessary liquidity to secure The Board of Directors continuously assesses whether the Group’s capital structure is in line with the interests of the Group and its stakeholders. The Group’s ﬁnancial risks are managed centrally as well as the Group’s liquidity management, including cash requirement and placement of excess liquidity. Liquidity risks a capital structure that supports long-term proﬁtable growth. It is Management’s assessment that the current capital structure provides the necessary ﬂexibility to accelerate and support the Group’s future strategy. Credit risk pertains to losses owing due to The Group’s customers or counterparties The Group’s customer base comprises professional customers. Credit management and payment terms are monitored for each customer group. The Group provides credit to franchisees and dealers, which are the Group’s customers. Customers have generally short terms of payment, reducing the overall exposure. Credit assessments are continuously performed on customers who make regular purchases. Bank guarantees, credit insurance, and other collaterals are utilized for the diﬀerent markets and customer categories. Credit risk in ﬁnancial contracts failing to fulﬁl their payment obligations. Transaction exposure occurs when sales and costs take place in diﬀerent currencies. Exchange rate ﬂuctuations may have an impact on the Group’s earnings and valuation of assets. The Group operates with a relatively low risk proﬁle with regards to currency ﬂuctuations. The Group does not purchase signiﬁcant amounts of raw materials outside the eurozone. Invoicing of sales is charged in DKK and NOK. In terms of invoicing of sales in NOK, the Group apply a hedging strategy to limit the impact of currency ﬂuctuations. Currency risks The Group is exposed to a increase in the interest rate, which may have an impact on the Group's earnings. The group manages interest rate risk by applying a mix of bank loans and mortgage loans. It is Group policy to fully or partially hedge interest rate risks on loans if the interest rate risk is material. An interest rate increase of 1% will have a negative impact on The Group’s proﬁt of c. DKK 2.9 million. Interest rate At A Glance Our business Perfomance Highlights ESG Corporate governance Financial statements ESG Statements TCM Group Annual report 2023 16 At AUBO, we cater to clients who appreciate kitchens at a level beyond the ordinary. We build our kitchens with an insistent West Jutland thoroughness with an attention to detail, which will last for everyday use for generations to come. PERFORMANCE highlights Bello At A Glance Our business Perfomance Highlights ESG Corporate governance Financial statements ESG Statements TCM Group Annual report 2023 17 Financial & non-financial highlights Financial Non-Financial Revenue, DKK Leverage Ratio (31 December) AVERAGE NO. of EMPLOYEES Co2 emission reductioN 2023 (scope 1 and 2) 1,111 Mi0. 4.08 445 36 34% (36) % (1,146) (2.35) (496) Compared to 2022 Adjusted EBIT, DKK NWC ratio (31 December) Women Commited to SBTI 56 -1.4 Mi0. % (103) (-4.2) Men 66% (64) * C02 emission year 2023 includes Aubo Production, whereas C02 emission year 2022 is without Aubo Production At A Glance Our business Perfomance Highlights ESG Corporate governance Financial statements ESG Statements TCM Group Annual report 2023 18 better than expected demand development in the kitchen market in Denmark in the latter half of the fourth quarter of 2024. The initial ﬁnancial outlook for 2023, stated in the Annual report 2022, was DKK 950-1,050 million (excluding the eﬀect from the acquisition of AUBO Production A/S announced in June 2023). Business review Svane Køkkenet Reported revenue declined by 3.0% in 2023 to DKK 1,111 million (DKK 1,146 million). The organic growth (i.e. excluding the impact of the acquisition of AUBO Production A/S) in the core business was negative by 15.0% (revenue excluding 3rd party revenue). Within Svane Køkkenet in Denmark focus was on strengthening the retail network through changes in ownership structures. In Norway the Arendal store closed towards the end of the year. Within Tvis Køkken a new store opened in Lyngby, closing an important white spot on the retail map. As a result of the economic slowdown four smaller Danish Tvis Køkken stores closed during the year, while one store in the Nettoline network in Denmark closed. In AUBO a new store opened in Horsens in the southeast part of Jutland, Denmark. Deco color Revenue in Denmark declined from DKK 1,032 million in 2022 to DKK 943 million corresponding to a decrease of 8.7%. The organic like-for-like decline in the core business in Denmark was 14.2% (excluding 3rd party revenue). Revenue outside Denmark grew from DKK 114 million in 2022 to DKK 169 million corresponding to an increase of 48.6%. The growth was driven by the acquisition of AUBO Production A/S, as the growth in the existing TCM distribution in Norway was negative by 19%. The slowdown in the kitchen market during 2023 impacted both B2C and B2B sales, however the long-term strategic focus on B2B pursued by TCM Group for several years proved its worth, as the strong B2B pipeline build up during 2022 ensured that invoiced sales remained strong in the ﬁrst half of 2023. Despite the change in sales mix, gross margin remained largely ﬂat, supported by the full year eﬀect of sales price increases The number of branded stores increased to 110 during 2023, of which 21 were AUBO stores. implemented during 2022. Full year gross margin was 19.6% compared to 20.1% in 2022. strategy of TCM Group. In 2023 TCM Group launched new products in all of the four brands, for example 17 contemporary colors across 6 design series in Svane Køkkenet, Trend in Nettoline, Bello in AUBO and the MG30 line in Tvis Køkken. TCM Group delivered a signiﬁcant reduction in the CO2 emissions of the Group (scope 1+2) of 36% compared to 2022. This was another step forward towards the ambition of TCM Group, which is to achieve a CO2 neutral production by 2028. To create full transparency regarding our products environmental impact, TCM Group in 2023 released third party approved and validated Environmental Product declarations (EPDs) for all laminate worktops produced by TCM Group and for the majority of kitchen products produced for and sold through brand Svane Køkkenet, Tvis Køkken and Nettoline. As the ﬁrst kitchen Reported revenue of DKK 1,111 million was slightly higher than the latest ﬁnancial outlook of DKK 1,040-1,090 million. The increase in revenue compared to our latest expectations was due to a Adjusted EBIT ended at DKK 55.6 million compared to DKK 103.4 million in 2022 and the latest ﬁnancial outlook in the range of DKK 40-50 million. The improvement in Adjusted EBIT compared to our latest expectations was due to the higher than expected sales in the fourth quarter of 2023. Initial ﬁnancial outlook for 2023, stated in the Annual report 2022, was DKK 70-100 million (excluding AUBO Production A/S). The average number of employees in 2023 was 445 compared to 496 in 2022. During the year the Group adjusted the workforce both in production and sales and administrative functions to mitigate the slowdown in demand. At the end of December 2023, the number of employees was 486. TCM delivered a significant reduction in the CO2 emissions of the group (scope 1+2) of 36% compared to 2022 110 Branded stores at the end of 2023 Innovation and development of new attractively designed products following the latest trends and customer demands plays an important role of the manufacturer in Scandinavia the EPDs disclose data of all stages of the life cycle assessment. Please refer to the ESG section for further information. The focus on sustainability and our ESG strategy continued in 2023. Among other achievements At A Glance Our business Perfomance Highlights ESG Corporate governance Financial statements ESG Statements TCM Group Annual report 2023 19 Operating expenses - cost ratio 15.2% Revenue (DKKM) Adjusted Ebit (DKKM) Operating expenses in 2023 were DKK 169.1 million (DKK 131.1 million). The increase in operating expenses of DKK 38.0 million was primarily due to the acquisition of AUBO Financial 1400 1200 1000 800 600 400 200 0 220 200 180 160 140 120 100 80 review Production A/S, combined with higher realized losses and increased provisions for potential losses on trade receivables, DKK 14.8 million in total (DKK 3.5 million). Operating expenses amounted to 15.2% of revenue in 2023 against 11.4% in 2022. Revenue Revenue in 2023 was down by 3.0% to DKK 1,111.3 million (DKK 1,146.1 million), with an organic decline (i.e. excluding the impact of the acquisition of AUBO Production A/S) of 13.2%. Adjusted EBITDA – margin of 7.7% 60 Adjusted EBITDA in 2023 was DKK 85.3 million (DKK 121.3 million), corresponding to an EBITDA margin of 7.7% (10.6%). The decrease in Adjusted EBITDA margin was driven by a lower gross margin and higher operating expenses. 40 Revenue in the Core business decreased by 1.1%, with an organic decrease of 15.0%, while revenue from supply of 3rd party products decreased by 8.4%, organically -8.4%. 20 0 Revenue in Denmark was DKK 942.5 million (DKK 1,032.5 million). The organic like-for-like decline was 12.5%. Revenue in Norway was DKK 155.8 million (DKK 97.8 million), up 59.3% driven by the acquisition of AUBO Production A/S. The organic decline in revenue in Norway was 19.0%. Revenue from other countries was DKK 12.8 million against DKK 15.7 million last year. Adjusted EBIT – margin of 5.0% Adjusted EBIT in 2023 was DKK 55.6 million (DKK 103.4 million), corresponding to an adjusted EBIT margin of 5.0% (9.0%). The decrease in adjusted EBIT was driven by a lower gross margin and higher operating expenses. Depreciations and amortizations were DKK 31.2 million (DKK 18.0 million), of which DKK 7.6 million relates to the AUBO Production A/S acquisition. Gross profit - gross margin of 19.6% Gross proﬁt in 2023 was 218.3 DKK million (DKK 230.6 million), corresponding to a gross margin of 19.6% (20.1%). During 2023, and in line with the second half of 2022, the share of lower margin B2B sales remained at historically high levels, as B2C demand remained subdued. Despite this change in sales mix, full year gross margin was largely ﬂat, as the negative sales mix impact was largely oﬀset by the impact of the sales price increases implemented in 2022. Non-recurring items TCM Group presents non-recurring items separately to ensure comparability. Non- recurring items consist of income and expenses that are special and of a non-recurring nature. For 2023 non-recurring items consist of transaction costs related to the AUBO Production A/S acquisition, impairment of ERP Project in AUBO Production A/S, and restructuring costs related to organisational restructuring carried out during 2023. The non-recurring items are speciﬁed next page: Reported revenue growth Adjusted EBIT margin -3.0% 5.0% * Figures in brackets refer to the corresponding period in 2022. At A Glance Our business Perfomance Highlights ESG Corporate governance Financial statements ESG Statements TCM Group Annual report 2023 20 non-recurring items The acquisition of AUBO Production A/S added inventories of DKK 29.7 million, hence the increase in inventories of DKK 11.8 million was fully driven by the acquisition. During the year inventories at all sites reduced as a result of the decision to decrease the stock of parts and raw materials after the supply situation in the market stabilized. liabilities by c. DKK 5 million as of 31 December 2023. Net working capital (dkkm) Non-recurring items, DKK m 2023 2022 Net interest-bearing debt – leverage ratio 4.08 Transaction costs related to business combinations Net interest-bearing debt amounted to DKK 349.3 million at the end of 2023 (DKK 288.1 million). The increase in net interest-bearing debt was due to the acquisition of AUBO Production A/S. 2.8 0.0 0 -20 -40 Impairment of ERP Project, AUBO Production A/S 1.9 5.1 0.0 Restructuring 4.7 Trade receivables and other receivables increased by DKK 39.3 million, where the acquisition of AUBO Production A/S added receivables of DKK 47.0 million. Other receivables as of 31 December 2023 is excluding DKK 8.5 million to subleases accounted for according to IFRS 16. These sub- lease receiveables are not considered to be part of net working capital. Equity - solvency ratio 44.1% Costs related to Covid-19 and supply chain disruptions Equity at the end of 2023 amounted to DKK 529.7 million (DKK 420.6 million). The equity increased by DKK 109.0 million since 1 January 2023 of which DKK 77.0 million was net proceeds from the issue of 1,221,419 new shares completed on 26 June 2023 and DKK 10.0 million from the issue of 149,925 new shares completed on 3 July 2023. 0.0 5.4 -60 -80 -100 -120 Net gain from the Celebert/ kitchn.dk transaction 0.0 -3.5 Total 9.8 6.5 EBIT EBIT for the ﬁnancial year 2023 was DKK 45.8 million (DKK 96.9 million). The decrease in EBIT compared to 2022 was driven by a lower gross margin, higher operating excenses and non- recurring costs. The operating liabilities increased by DKK 19.5 million, where the acquisition of AUBO Production A/S added operating liabilities of DKK 32.3 million. The extended credit for payroll taxes provided in the government’s inﬂation support package increased operating The solvency ratio was 44.1% at the end of 2023 (43.4%). Events after the balance sheet date No subsequent events have occurred that Equity at the end of 2023 amounted to DKK 529.7 million. The solvency ratio was 44.1% at the end of 2023. materially aﬀect TCM Group’s ﬁnancial position. Net profit Net proﬁt for the ﬁnancial year 2023 was DKK 21.5 million (DKK 70.5 million). Free cash flow excl. acquisitions of operations Free cash ﬂow excl. acquisitions of operations for 2023 was DKK 40.0 million against DKK 39.5 million in 2022. Free cash ﬂow was negatively impacted by a lower operating proﬁt, oﬀ set by a change in NWC of DKK 24.2 million compared to DKK -35.9 million in 2022. NWC ratio (%) Leverage ratio Cash conversion in 2023 was 37.6% (53.3%). Net working capital - NWC ratio -1.4% Net working capital at the end of 2023 was DKK -16.0 million (DKK -47.6 million). NWC ratio at the end of 2023 was -1.4% (-4.2%). The higher net working capital compared to 2022 was mainly explained by the acquisition of AUBO Production A/S, which due to a diﬀerent operating model in Norway, carries a higher amount of working capital. Svane Køkkenet Notes Platinum -1.4 4.08 At A Glance Our business Perfomance Highlights ESG Corporate governance Financial statements ESG Statements TCM Group Annual report 2023 21 Responsibility and Readers' guide sustainability have always been a part of the way we do business. Responsibility towards the environment, responsibility towards the customers and responsibility towards our employees and stakeholders. Non-financial disclosure requirements as per the Danish Financial Statement Act. Topic Page reference Section 99A Business model 8 Content of policies for sustainability, systems and due diligence processes results and KPIs: 22, 83-84 23-24 22, 81-82 25 Social performance/data A sustainabile worklife Environmental performance/data We take responsibility 27 Supplier management & anticorruption Section 99b and 107d 22, 31, 83, 85 24, 83 Target ﬁgures for the management body Policy for promoting underrepresented gender and diversity at management level Section 99d 31 Data ethics * Covers TCM Group and all subsidiaries Inﬁnity Sands ESG review At A Glance Our business Perfomance Highlights ESG Corporate governance Financial statements ESG Statements TCM Group Annual report 2023 22 ESG review Environmental performance, Ambition and progress Social performance, ambition and progress Emission reduction Gender equality Diversity Ton CO2e scope 1+2 TCM Group has deﬁned year 2021 as our baseline year for measuring our progress in terms of reduction of emission. In 2023 TCM Group committed to emission reduction following the guidelines from the Science based Iniatives (SBTi) target of 1.5 degree. Direct green- house gas emissions (scope 1) and emissions related to purchased energy (scope 2) should be reduced by 42 per cent in absolute terms by 2030. Our target exceeds our commitment to SBTi as we want to a achieve zero emision scope 1 and 2 by 2028. For scope 3 it is our aim to establish a baseline during 2024 and set reduction target in alignment with SBTi guidelines during 2024. TCM Group has a target of representation of the underrepresented gender on the Board of Directors of at least 40% before 2026. As of 31 December 2023 this target is achieved. Our aim to secure a sensible balance in terms of gender in all level of our organization. Where the underrepresented gender makes up for at least 40% committed SBTI 42% reduction by 2030 2020 2021 2022 2023 2028 2030 SBTi target Achieved Expected 44% 56% 43% 57% 36% 64% Board of Management employees directors Commited to SBTI In 2023 TCM Group committed to SBTi and had its reduction target for scope 1 + 2 approved. Women Men Only renewable electricity In 2023 TCM Group was only using renewable electricity at our production site, and will continue to going forward. Responsible forestry TCM Group ambition is only to source 100% certiﬁed responsible forestry. In 2023 sourced certiﬁed responsible timber. Towards zero accidents Our safety vision aims at having zero accidents. without 22 12 absence 20 zero accidents 2025 target 2023 100% 13 Number of accidents: 2022 82% 8 7 with absence 2021 82% 79 % 2021 2022 2023 UN Sustainable development goals (SDG) SGD, 5 Gender equality (target 5.5), 8. Decent work and economic growth (target 8.5 and 8.8), 12. Responsible consumption and production, 13. Climate action, 15. Life on Land. the emission and baseline has been adjusted in 2023 to include Aubo At A Glance Our business Perfomance Highlights ESG Corporate governance Financial statements ESG Statements TCM Group Annual report 2023 23 international standards regarding human rights as well as laws regarding equality and oﬀer fair and equal conditions in employment and working conditions, regardless of gender, ethnic origin, religion, and other personal circumstance. In 2023, we have included Aubo Production in our work to secure safe working conditions and with focus on increased knowledge sharing across locations and a reinforced focus on behavior and safety culture based on zero accidents. ESG strategy & Approach sustainable work Our whistleblower hotline and internal controls make up key instruments for controlling and reporting potential violations by employees and third parties. Furthermore, we conduct arbitrary supplier audits to monitor compliance with human and labor rights standards. Read more on our whistleblower hotline and supplier management in speciﬁc sections (page 27 and page 31). We monitor the occupational health and safety of our employees by measuring data on accidents, near-miss work accidents, as well as sickness absences. In 2023, we had a total of 22 accidents. 12 accidents have resulted in a total of 57 days of absence after the accident. The other ten Our ESG strategy sets the direction to embed sustainability ever deeper in the way we do business. A strategy that is guided by the UN accidents did not result in absence, but in some cases required the employee to perform a less strenuous job for a period after the accident. Even though the number of work-related accidents has increased in 2023, the number of abence related to accidents is signiﬁcantly lower than the previous year. The accidents were primarily related to behavior, where employees in their eager to do a good job disregarded safety UN Global Compact principle 1, 2, 3, 4, 5, 6, 10 Sustainable Development Goals and builds on our core values and brands - and integrating sustainability throughout our value chain from raw materials to after-sales and service. Our ESG strategy sets out transformative targets to drive decisions and actions within four areas of priority: TCM Group’s continued success relies on employing the most qualiﬁed people, and we are committed to ensuring a safe and healthy working environment, characterized by mutual trust and respect. We work actively to create sustainable work characterized by the following principles Safe working environments In TCM Group, we continually strive to provide the very best working environment. At our production sites, safety is our number one priority, and a lot of focus is on building and maintaining a safety culture to ensure that all our employees are safe while working. This means minimizing risks and enabling the best circumstances to provide a healthy and safe workplace for all our employees. Work safety has a great impact on employees and their families, as well as communities and the business. • • • • Sustainable work instructions. We use near-missed work accident report to ensure a contiues awareness of We take responsibility New ways ahead incidents that could lead to an accident, to share learnings and as a mean to take preventive actions. The number of near-miss reports is considerably higher in 2023 and we use this an an indication to the fact that our eﬀorts has an positive eﬀect. Nevertheless, we are determined Together we improve • • A safe and secure work environment that also enhances personal development. These are the areas where we believe we have the greatest impact on sustainable development through our business activities. Our systematic approach to sustainability makes us capable of strengthening our relationships with all key stakeholders and supporting business growth while continuously mitigating negative impacts by continuous learning and improvement. TCM Group has been a signatory to the UN Global Compact for more than a decade and commit to the Ten Principles of the UN Global Compact on human rights, labor, environment, and Flexibility to support a clear balance between work/private life, between individuals, teams, and organization. • Diversity and social commitment. Human and labor rights Our signatory to the UN Global Compact more than a decade ago testify to our long track record of working with human and labor rights. The primary risk we face in connection to non- compliance of human and labor rights are discrimination of employees and cases where speciﬁc conditions at our suppliers do not comply with these principles. Reported near miss work accidents Sickdays and absence #sickdays caused by work accidents #of reported near miss work accidents in TCM Group anti-corruption. 2023 2023 57 1232 2022 2022 125 937 Our Employee Handbook and Code of Conduct guide our employees and suppliers in terms of human and labor rights. Our focus is to have the right mechanisms, systems, and programs in place to ensure no violations and promote 2021 2021 58 896 Absence ratio related to sickness in 2023 Absence ratio related to work accidents in 2023 3.21 % 0.09 % responsibility toward others. We meet Danish and At A Glance Our business Perfomance Highlights ESG Corporate governance Financial statements ESG Statements TCM Group Annual report 2023 24 to eliminate work-related accidents, thus we will continue with even stronger focus on behavior and emphasize that no matter what, personal safety always come ﬁrst. Safety will continue to be on top of the agenda in the year to come. people with diﬀerent backgrounds to our oﬃces to reap the beneﬁts of diversity. We are also committed to creating positions with reduced working hours, wherever it is practically possible, and we continuously oﬀer citizens job clariﬁcation processes in close collaboration with the municipality. Focus on ongoing learning We strive to continuously upskill our employees, so the value of the individual employee increases and the employee skills remain relevant inside as well as outside of TCM Group. We use on the job training and through annual review we together with the employee make plans to support this. We believe that training has the best eﬀect when it is available when it is most relevant for the individual and it can be applied in practice. Besides working with learning and training internally, our TCM Learning platform also covers the training of sales staﬀ for our brands and kitchen installers. A talented and diverse workforce At TCM Group we are convinced that a diverse and inclusive work environment will beneﬁt our business and our society in general. At TCM Group, we recognize the diﬀerences between our employees. We believe that diverse teams, including management groups, have a better as well as more innovative collaboration leading to better decision-making that are encouraging inclusiveness and tolerance among employees. In TCM Group, we work actively to be a responsible workplace that recruits, promotes, and develops employees based on the individual's competencies and support diversity. We thus aim for our recruitment, promotions, terms of Tolerant workplace We must take responsibility for training the next generation of qualiﬁed employees and give them the chance to learn relevant competencies and gain useful work experience. Throughout the year, TCM Group helps many people to gain practical work experience, all of whom for some reason need a helping hand to gain a foothold on the job market. We constantly strive to ensure that every employee has the same opportunities, regardless of gender. As a result, we focus on equal terms and identify candidates of diﬀerent genders when we hire new managers. We also seek to ensure a workforce composition consisting of a combination of both young and experienced employees. group the underrepresented gender makes up for 31%. The current composition reﬂects the traditional gender distribution within employment, and any dismissals to be carried out without regard to gender, age, nationality, sexual orientation, physical ability, disability, political opinion, ethnicity, family status, religiosity, or other beliefs. We also aim to achieve an manufacturing companies, where there is a predominance of male foremen in production, and at the administrative level, a slight appropriate equal distribution of men and women in managerial positions. Our approach to promote diversity and inclusion is formulated and predominance of female employees. During 2023 new competences from both gender has been added to the management group. Development towards a more equal gender distribution in other management levels will happen gradually in connection with organisation development and recruitment.We seek to meet of target by 2029. We work continuously with apprentices in TCM Group and in 2023 we had 12 apprentices in the Group. We have become more focused on hiring anchored in our diversity and inclusion policy. The policy is available on TCM Group homepage. We seek to promote diversity and achieve sensible gender diversity in both the Board of directors and the Executive Management and other management levels. TCM Group aims for a gender composition in the rest of management as well as in the total workforce, where the underrepresented gender makes up at least 40% in line with the objective for the composition of the board of directors (see governance section page 31). Compensation Case: AUBO Production - Social responsibility At TCM Group it is our policy that equal jobs are rewarded with equal pay. Any diﬀerence in pay is solely based on qualiﬁcations and experience (please see page 83). At AUBO Production is almost 10 % of the employees employeed in positions with reduced working hours, in jobs that are designed speciﬁcally to the individual and their needs. This is not somehting new, but deeply rooted in the culture of AUBO. The key to this, is that they speak openly about the individual's limitations and allign expectations. AUBO Production know they have been a success when ﬂexjobbers resigns -ready to take on new challenges outside the organization. The executive management consists of the CEO and CFO who are both male, but including second management level the underrepresented gender makes up for 44%. For the complete management At A Glance Our business Perfomance Highlights ESG Corporate governance Financial statements ESG Statements TCM Group Annual report 2023 25 Approved SBTi target Having already taken the ﬁrst steps towards a Waste At TCM Group we have a constant focus on limiting waste in general. At our manufacturing sites is all waste sorted in material fractions, which allows us to ensure that waste is used with the highest possible resource value. Our wood fraction is returned to our chipboard supplier and together with wood from Danish recycling centers used for production of chipboards that then will be used by TCM Group in the production of new kitchens. Wood from our worktop production of useable size ﬁnds new use as serving trays or is delivered to wood workshops at local schools. We take Case: Waste management reduced CO2 emission, we have in 2023 set a CO2 reduction target which has been approved by Science Based Targets initiative (SBTi). Through an intensive focus on waste management and the dedication our employees, the Nettoline factory has been able to not only to ensure an increase in the portion of waste that is recycled by 18.5% but at the same time they have been able to reduce the amount of waste with 111 ton. responsibility We have set a target of reducing our scope 1 and scope 2 emission by 42% by 2030 from a 2021 baseline year. According to SBTi guidelines a company of TCM Group size must ensure min 42% reduction of scope 1 and 2 with baseline year 2021 by 2030 to be in alignment with the Paris agreement. Having our target approved by SBTi also means we have committed to start to map our scope 3 emissions which will be a main priority in 2024. UN Global Compact principles: 7, 8, 9 Distribution of Co2 emission We take pride in the fact that all our products are both designed and produced in Denmark. Good craftsmanship is a focal point in our production in combination with quality and a high degree of innovation. We focus continuously on reducing our climate impact, and our production waste and increasing the recycling rate of our waste. In the coming year TCM Group will continue its focus on waste management and waste reduction internally, with suppliers and engage in external partnership as TCM will participate in two TCM Group has committed to ensure net zero C02 emissions for scope 1 and 2 by 2028 and we continue our journey to meet this goal. Transport 2023 2022 20% 10% diﬀerent projects under Closing the Loops, value stream focused projects supported by The Danish Board of Business Development. While we have made good progress in raising the percentage of waste that goes to recycling in 2023, these external partnerships can become crucial to reach our aim of recycling 99.7 % (based on weight) of all material categories during 2025. Electricity consumption In 2023 TCM Group has decreased its electricity consumption by 17%, this despite that AUBO Production has been included into TCM Group accounting for the full year of 2023. At AUBO Production we see an increase in electricity consumption, this is a result of a transition from heating systems based on natural gas to electric heating pumps. The direct savings are a result of investments made to increase energy eﬃciency and continuously actively promote how daily awareness and behavior can aﬀect energy eﬃciency at our production facilities. Electricity Environmental sustainability and emissions It is TCM Group’s ambition to achieve net zero direct and indirect emissions from sources owned or controlled by TCM Group (Scope 1 and Scope 2) by 2028. An important step towards this has been to enter into a contractual agreement ensuring that since January 1st 2023 our electricity 0% Heating 46% 80% 44% Water management TCM Group uses very limited amounts of water for production. Water is primarily used for sanitation and heating purposes. Water used for production is used to support our painting processes; any wastewater in that respect is carefully separated and disposed of in the right manner. consumption has been fully covered by renewable energy certiﬁcates from wind and solar power. The shift in the distribution of TCM Group C02 emissions in 2023 is a result of only using renewable electricity. During 2023 AUBO Production became part of TCM Group. Having already gone through meny of the same steps as TCM Group towards reducing the CO2 emissions, the addition of AUBO only aﬀected the Scope 1 emission of the Group. Electric company cars TCM Group operates a company vehicle ﬂeet consisting of 28 mixed passenger vehicles and commercial vans. To reduce our impact, we have in 2023 taken the ﬁrst fully electric vehicles into our ﬂeet. The transition to electric cars will happen gradually and at a pace that follows the development of charging networks and regular replacements of vehicles. At A Glance Our business Perfomance Highlights ESG Corporate governance Financial statements ESG Statements TCM Group Annual report 2023 26 Circular design Transparancy Circular design is important because it helps to create products and systems that are designed for sustainability. This involve designing products that are made from renewable or recycled materials, that are durable and easy to repair or refurbish, and products that can be reused, recycled, or repurposed at the end of their useful life. Circular design is one of pillars in our product development process, where we work with input materials, material processing and considering proper disassembly and possibilities in terms of recycling at a component level. Transparency, valid data and certiﬁcations are all crucial instruments to improve the performance of our products. NEW WAYS Case: Svane x QubeZero Through 2023 Svane has engaged in a number of AHEAD In 2023, TCM Group took a big step towards increased transparency about our products as TCM published Environmental Product declaration (EPDs) for a majority of our product assortment for both kitchens and worktops covering all brands. As the ﬁrst kitchen manufacturer we have disclosed all stages of the lifecycle. TCM will continue to develop EPDs to ensure even broader transparency of our assortment. corporations in order to challenge how we traditionally think with kitchens. In June Svane kitchen model INFINITY was part of QubeZero, M2plus architecture and AQUNE’s suggestion on how to redeﬁne sustainable living presented at the UIA World Congress of Architects in Copenhagen. QubeZero is a revolutionary tiny-home project that is set to challenge and inspire how to reduce impact from C02 emissions in buildings by combining upcycling and green technology without compromising on quality or design. UN Global Compact principles: 12 Our ambition is that in 2025 all our new designs will be 100% circular. Innovation and new ideas are essential for sustainability as it helps ﬁnd solutions to the environmental and resource challenges that we face. Innovation and product development have always been a part of our DNA. To ensure the focus in our product development, we have included three focus areas in our current design and development process under the principle of New Ways Ahead. A healthy indoor climate When creating better kitchen environments for the heart of our customers’ homes a healthy indoor climate is an important factor. We constantly strive to positively impact the indoor environment through e.g., research and development within surface treatment and new materials. We ensure valid and documented progress through third parties and external certiﬁcations. Newly acquired Aubo Production share the same vision and have a long track record of having all products in their product portfolio third party validated to ensure compliance to BREEAM requirements for sustainable buildings. Extended lifecycle In TCM Group, the design, development, and production of high-quality products with high durability are always in focus. An important part of decreasing our climate impact and maximizing product value is extending the life of our products, their design, and their use. Aesthetics, however, also plays a crucial role in terms of retroﬁtting existing kitchens to continuously match current living and design standards. In 2023 we have continued our journey to ensure that kitchens produced by TCM Group can be upgraded and stay relevant. Our brands are able to actively help customers upgrade their existing kitchens and they are not limited to only supporting kitchens sold through their own brands. We are beginning to see an increase in the demand from customers actively requesting this solution rather than replacing their entire kitchens. Qubwzero by Aqune and m2plus architectcts Svane Køkkenet - Inﬁnity At A Glance Our business Perfomance Highlights ESG Corporate governance Financial statements ESG Statements TCM Group Annual report 2023 27 certiﬁed responsible sources, in addition to using work with suppliers on ESG matters is our Code of Conduct. continue our work with promoting anti-corruption in all our business relations. a high level of recycled material. Together we improve Aubo Production is not FSC® certiﬁed but it is our ambition to ensure that also Aubo Production transitions into only using responsible certiﬁed timber, starting in 2024. The total share of TCM Group’s purchasing, covered by our Code-of-Conduct was 82% in 2023 which also covers all suppliers from non-EU countries. TCM Group suppliers are primarily located in Europe and a majority of these are located relatively close to our production sites in Tvis and Aulum. In 2023, 92% of materials directly used in our production was made in Europe, of which 54% originated from Denmark or our neighbouring countries (DK, DE, SE). Transport of all production of direct materials and components to our production is made in Europe. Inbound and outbound transportation across our value chain is another focus area in terms of reducing CO2 -emissions. All our transport providers have as a minimum requirement signed our code of conduct. 92% UN Global Compact principles: 1, 2, 3, 4, 5, 6, 7, 8, 9, 10 The inclusion of AUBO Production to TCM Group in 2023 has started a process of mapping and optimizing the shared range of suppliers. We do this to make sure we reap the synergies that come from combining the knowledge of two companies with so many similarities. This is also the TCM has comitted to Science based target intiative and initiated a comprehensive scope 3 analysis covering relevant needs and possibilities before both launching speciﬁc initiatives and maturing our future scope 3 path and ambition. No later than 2025 we will report on our scope 3 ambition and progress. Like with the impact of our activities, our responsibility and commitment do not stop at our gates. Thus, we work with ESG and sustainability across our value chain both upstream and downstream. Our largest environmental impact originates from the materials we source from suppliers and sub-suppliers. Therefore, close collaboration and partnership with suppliers and business partners are crucial to continuously move the needle in the right direction. Production country of raw materials and components Sweden beginning of a process towards a more structured approach to supplier management. * based on total purchasing spend 3% Packaging material In 2024 we plan to start rating our suppliers in view of our ESG strategy. Work in 2024 will primarily be building the framework rating the suppliers on their ﬁt with and contribution towards our ESG related targets and start evaluating the ﬁrst suppliers. Denmark Our target on the packaging is that all material is recyclable during 2024. A goal that will be achieved by phasing out polystyrene in our prod- uct packaging. 20% Transparency, valid data, and certiﬁcations are all instruments to improve the performance of ESG parameters across our value chain. Besides supplier management in general we focus on sustainable forestry, transport, and packaging. Netherlands Another focus is the “right” packaging volume. Here the target is to hit the right balance between reducing the amount of packaging without risking that products become damaged during transport. Anti-corruption TCM Group is exposed to the risk of non- 3% compliance with anti-corruption rules and regulations for example by obtaining an advantage with illegal means, via our employees, suppliers, franchisees and dealers. In TCM Group we have a zero-tolerance approach to corruption and bribery. Thus, our policy is to comply with all applicable regulations and to promote anti-corruption behavior in all our business relations. Our Code of Conduct lay out our zero-tolerance approach to corruption for employees, suppliers, franchisees, and dealers. Besides having ﬁrm values and a strong culture we conduct internal controls and make our whistleblower hotline available to detect breaches. There have been no incidents violating the anticorruption policy in 2023. In 2o24 we will Germany Responsible forestry The world continues to face an increasing In collaboration with our packaging suppliers, we expect to identify further areas for optimizing material choice as well as identifying the ideal vol- umes applied and thereby reduce total volumes of packaging material to be used. 31% number of complex and interconnected challenges, with the climate crisis and loss of biodiversity being the most critical. It is through climate change mitigation eﬀorts and the use of responsible wood that we can have the greatest impact on biodiversity in TCM Group. TCM Group's work with certiﬁed wood goes a long way back and the Group has been FSC® certiﬁed since 2010 for the vast majority of the product assortment. However, as wood is the primary material category of input to our production, it is very important to us to exclusively use wood from Supplier management Our responsible sourcing practices are focused on environmental, social, and governance issues across our value chain. TCM Group is committed to respect human rights as outlined in the United Nations Universal Declaration of Human Rights and the UN Global Compact. The backbone of our Italy Europa others 13% Asia Austria 4% 8% 18% At A Glance Our business Perfomance Highlights ESG Corporate governance Financial statements ESG Statements TCM Group Annual report 2023 28 A Tvis kitchen is a long- term choice of Danish quality for your home We know this, because we have been making kitchens for more than 70 years Corporate MG30 Governance At A Glance Our business Perfomance Highlights ESG Corporate governance Financial statements ESG Statements TCM Group Annual report 2023 29 The Board of Directors holds 9 ordinary meetings each year and will further convene as needed. In the ﬁnancial year 2023, 15 board meetings were held. qualiﬁcations, experience and skills the Board of Directors must possess in order for the Board of Directors to best perform its tasks, taking into account the Group’s current needs. The Board of Directors evaluates its work on an annual basis. All Board Members are up for election at each Annual General Meeting. Corporate governance The Group’s Executive Management is in charge of the day-to-day management, while the Board of Directors supervises the work of the Executive Management and is responsible for the overall management and strategic direction. In relation hereto, every year the Board of Directors Corporate governance recommendations TCM Group is committed to exercising good corporate governance, and the Board of Directors therefore evalu- ates the Group’s management systems at least once a year to ensure that the structure is appropriate relative to the Group’s shareholders and other stakeholders. Audit Committee The Board of Directors has set up an Audit Committee. The Chairman of the Audit Nasdaq Copenhagen has incorporated the recommendations of the Danish Committee on Corporate Governance in its Rules for Issuers of Shares. considers the group’s overall strategy in order to ensure continuous value creation. The Committee is independent and is skilled in accounting. The purpose of the Audit Committee includes monitoring the ﬁnancial reporting process, the company’s internal control and risk management systems and the collaboration with the independent auditors. The Audit Committee consists currently of 2 members, Sanna Suvanto- Harsaae and Anders Skole-Sørensen, and is led by Anders Skole-Sørensen. The Audit Committee held 7 meetings in the ﬁnancial year 2023. requirements for the Executive Management’s timely, accurate and adequate reporting to the Board of Directors and for the communication between these two corporate bodies are laid down in the rules of procedure of the Executive These recommendations are available at the website of the Committee on Corporate Governance, www.corporategovernance.dk. Management, which are reviewed annually and approved by the Board of Directors. TCM Group complies with all these recommendations. The Group’s corporate governance statements are available on our website at Composition of the Board of Directors Duties and responsibilities of the Board of Directors At TCM Group, management duties and responsibilities are divided between the company’s Board of Directors and Executive Management. No one person is a member of both these bodies, and no member of the Board of Directors has previously been a member of the Executive Management. TCM Group has laid down rules of procedure for the Board of Directors, which are reviewed annually. The Board of Directors currently consists of seven members elected at the general meeting and has elected a Chairman and a Deputy Chairman. The members of the Board of Directors are a group of professionally experienced businesspeople who also represent diversity, international experience and skills that are considered to be relevant to TCM Group. All members, but one, of the Board of Directors elected by the shareholders are regarded as independent. Nomination Committee The Board of Directors has set up a Nomination Committee comprising at least two members of the Board of Directors, where at least one is also a member of the Remuneration Committee. The Chairman of the Board of Directors is also the Chaiman of the Nomination Committee. The overall purpose of the Nomination Committee is to help the Board of Directors ensure that appropriate plans and processes are in place for the nomination of candidates to the Board of Directors and the Executive Management. The Nomination Committee currently consists of 3 members, Sanna Suvanto-Harsaae, Anders Skole- Sørensen and Carsten Bjerg, and is led by Sanna Suvanto-Harsaae. The Nomination Committee held 5 meetings in the ﬁnancial year 2023. investor-en.tcmgroup.dk/CorporateGovernance The Board of Directors determines once a year the Audit Committee Board of Directors Executive Management Management Team Employees Nomination Committee Remuneration Committee 15 Board meetings in 2023 Remuneration Committee The Board of Directors has set up a Remuneration Committee comprising at least two members of the Board of Directors. The purpose of the Remuneration Committee is to ensure that the At A Glance Our business Perfomance Highlights ESG Corporate governance Financial statements ESG Statements TCM Group Annual report 2023 30 Group maintains a remuneration policy for the members of the Board of Directors and the Executive Management as well as general guidelines for incentive pay to the Executive Management. The Remuneration Committee consists currently of 3 members, Sanna Suvanto- Harsaae, Anders Skole-Sørensen and Carsten Bjerg, and is led by Sanna Suvanto-Harsaae. The Remuneration Committee held 5 meetings in the ﬁnancial year 2023. mitigating the risk associated with the ﬁnancial reporting. The Company believes that the Group’s reporting and internal control systems enable it to be compliant with disclosure obligations applying to issuers whose shares are admitted to trading and oﬃcial listing on Nasdaq Copenhagen. As part of the overall risk management, the Group has set up internal control systems, that are deemed appropriate and suﬃcient in relation to the Group’s activities and operations. The internal control systems are evaluated on an ongoing basis. Remuneration of members of the Board of Directors and the Executive Management The Board of Directors has adopted a remuneration policy and general guidelines for incentive pay, which have been approved by the general meeting. Both policies are available at governance-en.tcmgroup.dk. The remuneration policy supports the goal of attracting, motivating and retaining qualiﬁed members of the Board of Directors and the Executive Management. The remuneration is designed to align the interests of the Board of Directors, the Executive The Group’s procedures and internal controls are planned and executed to ensure a reasonable level of comfort that the ﬁnancial reporting is reliable and in compliance with internal policies and gives a true and fair view of the Group’s ﬁnancial performance, the ﬁnancial position and material risks. The procedures and controls are furthermore planned with a view to support the quality and eﬃciency of the Group’s business processes and the safeguarding of the Group’s assets. The evaluation of the risks includes an assessment of the likelihood that an error will occur and whether the ﬁnancial impact of such error would be material. Management and the company’s shareholders, to support the achievement of TCM Group’s short- term and long-term strategic targets and stimulate value creation. Reference is made to note 5 in the consolidated ﬁnancial statements for a speciﬁcation of the remuneration paid to the Executive Management and the Board of Directors. In addition to the above, the Group has developed internal control and procedures in relation to the ﬁnancial reporting process with the aim to enable the Group to monitor the Group’s performance, operations, funding, risk and internal control. The Group continues to improve the internal control and procedures in relation to the ﬁnancial reporting process and believes, that the current control and procedure in place enables the Group to be compliant with the disclosure obligations applying to issuers of shares on Nasdaq Description of procedures and internal control in relation to the financial reporting process The Board of Directors and the Executive • • • Weekly reports of incoming orders and gross and net revenue by month; • • Four-eye principle within the ﬁnance depart- ment to ensure the quality of the accounting records; Tvis Køkken MG50 color Management are ultimately responsible for the Group’s risk management and internal controls in relation to its ﬁnancial reporting and approve the Group’s general policies in this regard. The Audit Committee assists the Board of Directors in overseeing the reporting process and the most important risks. The Executive Management is responsible for the eﬀectiveness of the internal controls and risk management and for the implementation of such controls aimed at Monthly revenue reports, on a per store basis, of the Group’s sales to stores; The majority of all invoices received go through a standardised authorisation process. In addition, a detailed review of cost on account level is made in connection with the monthly reports. Consolidated monthly reports summarising results for legal entities including balance sheet and cash ﬂow results in comparison to budgeted performance and previous year performance and explanations of deviations, together with key performance indicators; Copenhagen. The internal controls and procedures in relation to the ﬁnancial reporting process include, among other things: At A Glance Our business Perfomance Highlights ESG Corporate governance Financial statements ESG Statements TCM Group Annual report 2023 31 Organizing ESG For the board elected by the general meeting, EU Corporate sustainable reporting directive and EU taxonomy To ensure a steady progress on our ambitions and targets and to maintain and develop ESG as an integrated part of our way of doing business, TCM Group has an ESG Steering Committee that is organized around our strategic focus areas and with the involvement of the relevant TCM Group is aiming for a representation of the underrepresented gender of at least 40%. With a distribution of 3 women and 4 men of the 7 members elected by the general meeting in 2023, TCM Group meets our target and according to the Danish Business Authority's deﬁnition, now have an equal gender distribution on the board. DATA PROTECTION POLICY The corporate sustainability reporting directive(2022/2464/EU), also known as CSRD came into force the 15. January 2023. As TCM Group is a listed company with less than 500 full time employees in average, TCM does not fulﬁll the requirement of entities in scope of the Regulation before ﬁnancial year 2025. In connection with TCM Group’s delivery of products and services within kitchen, bathroom and storage, TCM Group collects relevant data. Our policy regarding data protection and conﬁdentiality is available on TCM Group homepage. stakeholders. It consists of the CFO, Head of Product Management, Head of Supply, and Head of HR. The ESG steering committee cover issues such as sustainability risks, and opportunities, as well as recommendations for further Incentive pay The long-term incentive program for TCM Group’s executive management holds ESG performance-related criteria. TCM Group has started preparing to ensure compliance towards the CSRD. First step is a double materiality assessment that was initiated in 2023. This involves consideration of the outside-in ESG impact on TCM Group´s business, as well as the inside-out impact of TCM Group on its surroundings. The double materiality assessment will be concluded in 2024 as part of the preparations for implementation of the EU Corporate Sustainability Reporting Directive (CSRD). improvements, and convenes every second month. The ESG-manager is responsible for strategy deployment as well as identifying and pursuing further strategic opportunities. Cross functional teams from the line of business support the daily operations and ensure progress in each of the strategic focus areas. Whistleblower system Tax Residence TCM Group whistleblower system is available for internal and external reporting of any witnessed activities or reasonable suspicion of serious and reprehensible conditions or illegalities to the group. All internal and external stakeholders can access the whistleblower system through an externally hosted website. The system is anonymous, and all communication is encrypted, which means that TCM Group is not able to trace any speciﬁc whistleblower report back to the reporting individual. TCM Group has a non-retaliation policy regarding any concerns reported. TCM Group A/S operates in Denmark and Norway, is listed on the Copenhagen Stock Exchange (Nasdaq Small Cap Copenhagen) and pays taxes locally in Denmark and Norway. In 2023 coporate tax in TCM Group amounted to 7.2 mio. kr. 99.3% in Denmark and 0.7% in Norway. Our tax policy is available at the TCM Group homepage. Diversity Policy TCM have formulated a diversity and inclusion policy that is available at TCM Group hompage. Please refer to page 24 for the nature of the policy. The policy is available on TCM Group homepage. The coming two years will serve as preparation and practice in terms of meeting the CSRD requirements with an ongoing focus on data collection, data quality and data control. Our goal is to drive constant improvement and track progress, as an integral part of our ESG Data ethics Policy TCM Group collects data to ensure delivery of products and services within kitchen, bathroom and storage, and to service customers best in case of quality complaints or inquiries regarding information on speciﬁc orders. TCM Group primarily uses the collected data in connection with order processing, i.e. order conﬁrmation and delivery, and in any follow-up complaints or inquiries. Data in the daily work and storage of data is operationalized and systematized via internal procedures and policies across the entire TCM Group. The overall responsibility for decisions, application and implementation of new technologies as well as the use of non- personally identiﬁable and personally identiﬁable data is anchored in TCM Group's executive management. Gender Diversity on the Board of directors and among other executives TCM Group Whistleblower system can be accessed here. management system. We will focus on KPIs that will be reported on an annual basis and undergo independent limited assurance. When composing the members elected by the general meeting, TCM Group focuses on diversity as well as on the members' skills and experience. We aim for an equal gender composition, which also reﬂects essential competencies within TCM Group's focus areas. The system is available in a number of local languages to make sure that it is possible for everyone who may have concerns to report in their local languages. Internally the reporting platform has been promoted to make sure that employees at TCM Group know that there is an anonymous platform available. In 2021 TCM Group reported on EU Taxonomy eligible turnover, OpEx and CapEx as required by the EU Regulation (EU 2020/852, article 8, the "EU Taxonomy"). The EU regulation applies to listed companies with more than 500 employees. In 2022 and 2023 TCM Group had less than 500 full time employees in average and is therefore not in scope of the Regulation. TCM Group will resume Taxonomy reporting by 2025 or before 2025 if TCM Group falls within the reporting requirements according to the Corporate Sustainability Reporting Directive (CSRD). TCM Group will continue to develop and optimize internal processes to ensure alignment to EU Taxonomy. To ensure that the group's board is composed of the right proﬁles and skills, TCM Group has deﬁned a target for the board's gender and status as an independent. The Group wants a board where both gender are represented. We believe this can create the basis for the best debates and add diﬀerent perspectives and input to how we run and develop the business and approach challenges. In 2023 there has been no reported cases 0 At A Glance Our business Perfomance Highlights ESG Corporate governance Financial statements ESG Statements TCM Group Annual report 2023 32 Tvis Køkken Nordic Board of Directors Chairman of Nomination Committee and Member of Nomination Committee and Remuneration Committee. Remuneration Committee and member of Audit Committee. Independent. Independent. Member since: 2018 Member since: 2016 Participated in 15 of 15 board meetings in 2023. Number of shares end 2023: 7,092 (2022: 2,441) Participated in 15 of 15 board meetings in 2023. Number of shares end 2023: 20,711 (2022:19,781) Carsten Bjerg holds a Bachelor in Production Engineering from the Technical University of Denmark. Sanna Mari Suvanto-Harsaae holds a Bachelor of Science from Lund University. Sanna Mari CARSTEN BJERG Suvanto-Harsaae Other positions: Other positions: Board member Sanna Mari Suvanto-Harsaae is member of the executive management of Rakaas ApS and chairman of the board of Nordic Pet Care Group A/S, BoConcept A/S, Orthex Oyj, Posti Oy, and Finnair Oyj. She is also member of the board of directors of Elopak AS, Broman Group Oyj and CEPOS. Carsten Bjerg is deputy chairman of the board of directors of COWI Holding A/S, and Aarhus University and chairman of the board of directors of Guldager A/S, Robco Engineering A/S, Hydrema A/S, Bogballe A/S, Dansk Smede- og Maskinteknik A/S, Epoke A/S, Bredal A/S, Agrometer A/S and Bredal Industri Lakering A/S. Chairman of the company Danish nationality. Born in 1959. Danish and Finnish nationality. Born in 1966. Chairman of Audit Committee and member of Nomination Committee and Remuneration Committee. Independent. Member since: 2018 Participated in 13 of 15 board meetings in 2023. Number of shares end 2023: 6,950 (2022: 3,850) Independent. Member since: 2017 Participated in 15 of 15 board meetings in 2023. Number of shares end 2023: 10,153 (2022: 10,153) Søren Mygind Eskildsen holds a Bachelor of Engineering and MBA from the Southern University of Denmark. Anders Skole-Sørensen holds a MSc econ. from the University of Copenhagen. Other positions: Anders SØREN MYGIND ESKILDSEN Søren Mygind Eskildsen is CEO of Louis Poulsen A/S and Audo A/S. Skole-Sørensen Other positions: Anders Skole-Sørensen is a member of the board of directors in F. Uhrenholt Holding A/S. Deputy Chairman Board member Søren Mygind Eskildsen is chairman of board of directors of Ege Carpets A/S and member of the board of directors of Gabriel A/S. Danish nationality. Born in 1962. Danish nationality. Born in 1972. At A Glance Our business Perfomance Highlights ESG Corporate governance Financial statements ESG Statements TCM Group Annual report 2023 33 Board of Directors Executive Management Independent. Independent. Elected in 2022. Since March 2020 Member since: 2023 Number of shares end 2023: 55,876 (2022: 48,125) Participated in 11 of 11 possible board meetings in 2023. Participated in 15 of 15 board meetings in 2023. Number of shares end 2023: 1,550 (2022: 0) Number of shares end 2023: 0 (2022: 0) Prior to joining TCM Group, Torben Paulin was CEO at BoConcept, a leading Danish design and lifestyle brand with nearly 300 franchise stores in 60 countries. Jan Amtoft holds a Bachelor of Computer Science (Hons) from DeMontfort University. Pernille Wendel Mehl holds a Grad. Dip. BSC. In Business Administration (HD A), Master of Management Development (MMD) and CBS/ Børsen Executive Board Programme. Other positions: Jan Amtoft is CIO at Rockwool A/S. Other positions: Pernille Jan Amtoft Torben Paulin Torben Paulin is member of the board of directors of Zefyr Invest A/S. Wendel Mehl Other positions: Board member Chief Executive Oﬃcer Pernille Wendel Mehl is CEO of Copenhagen Zoo and member of the board of directors of Vetnordic A/S, COOP Danmark A/S, Foreningen DGI Byen, and Nine A/S, and chairman of the board of Dansk Markedsføring. Board member Danish nationality. Born in 1964. Danish nationality. Born in 1965. Danish nationality. Born in 1972. Non-independent. Since 2023 Member since: 2023 Number of shares end 2023: 5,426 (2022: 0) Participated in 11 of 11 possible board meetings in 2023. Prior to joining the TCM Group, Thomas Hjannung worked with Faerch Group, ECCO Sko A/S and Bang & Olufsen A/S in varius senior positions, including international assignments. Number of shares end 2023: 0 (2022: 0) Erika Hummel holds a B.A. in Economics and an MBA both from the University of California, Los Angeles. Erika Hummel Other positions: Thomas Erika Hummel is CEO of Sodulo Immobilien GmbH and chairman of the board of directors of Hummel & Partner AG. Hjannung Board member Chief Financial Oﬃcer Italian and German nationality. Born in 1961. Danish nationality. Born in 1973. Svane køkkenet DECO At A Glance Our business Perfomance Highlights ESG Corporate governance Financial statements ESG Statements TCM Group Annual report 2023 34 Shareholder information TCM Group A/S is a part of the Nasdaq OMX Copenhagen Small Cap index. The development in TCM Group’s share price during 2023 has been aﬀected, like many of our industry peers, by the general negative sentiment in the stock market towards companies with exposure to the construction sector and the housing market, due to the macro-economic uncertainty, high interest rates and cost-inﬂation. In line with peers the share price declined to DKK 45.5 on 31 December 2023 from an opening value of DKK 73.0. Average share price during 2023 was DKK 62. Financial calender TCM Group share price development in 2023 During 2023 TCM Group completed a directed rights issue issuing 1,221,419 new shares, Ownership The ﬁnancial year covers the period 1 January – 31 December, and the following dates have been ﬁxed for releases etc. in the ﬁnancial year 2024: Members of the Board of Directors held at 31 December 2023 46,456 shares (31 December 2022 40,625 shares), and members of the Executive Management held 61,302 shares (31 December 2022 91,602 shares), in total 107,758 shares (31 December 2022 132,227 shares), equivalent to 1.0% of the share capital (31 December 2022 1.4%). providing net proceeds of DKK 77.0 million, in connection with the acquisition of Aubo Production A/S. As part of the payment to the sellers of AUBO Production A/S, the Board of Directors decided to issue 149,925 shares. The nominal value of the company’s share capital at 31 December 2023 was DKK 1.1 million divided into shares of DKK 0.1, equivalent to 10.5 million shares and 10.5 million votes. As of 31 December 2023, TCM Group A/S owns 75,000 treasury shares, corresponding to 0.7% of the share capital. 11 April 2024 Annual general Meeting 2024 At 31 December 2023, the following shareholders had notiﬁed shareholdings above 5% of the share capital (see below). 16 May 2024 Interim report Q1 2024 21 August 2024 Interim report Q2 2024 Business registration no Notified shareholding 22 November 2024 NAme Domicile Interim report Q3 2024 BI Asset Management Fondsmæglerselskab A/S Paradigm Capital Value Fund 20896477 B129149 Copenhagen, Denmark Luxembourg, Luxembourg Hillerød, Denmark 10.8 % 15.8 % 10.3 % 12.1 % 26 February 2025 Interim report Q4 2024 and Annual report 2024 Arbejdsmarkedets Tillægspension Paradigm Capital Value LP 43405810 99-0375707 Delaware, USA 9 April 2025 Annual general Meeting 2025 * According to latest shareholding notiﬁcations At A Glance Our business Perfomance Highlights ESG Corporate governance Financial statements ESG Statements TCM Group Annual report 2023 35 The Board of Directors has adopted a dividend policy with a target payout ratio of 40-60 percent of consolidated net profit for the year. The company’s investor relations website, investor.tcmgroup.dk, contains all oﬃcial ﬁnancial reports, investor presentations, the ﬁnancial calendar, corporate governance documents and other material. Dividend DISTRIBUTION Analyst coverage TCM Group is currently covered by four analysts: During 2023, TCM Group did not distribute dividend. For the ﬁnancial year 2023, the Board of Directors has decided not to propose a distribution of an ordinary dividend. Aktieinfo John Stihøj Carnegie Alexander Borreskov Danske Bank Poul Ernst Jessen SEB Ulrik Bak Dividend POLICY The Board of Directors has amended the dividend policy with a target payout ratio of 40-60 percent of consolidated net proﬁt for the year. Payment of dividends, and the amounts and timing thereof, will depend on a number of factors, including future revenue, proﬁts, general ﬁnancial and business conditions, restrictions agreed in ﬁnancing agreements, strategic initiatives such as M&A activities or large-scale investments decided upon by the Board of Directors, and such other factors as the Board of Directors may deem relevant as well as applicable legal and regulatory requirements. There can be no assurance that in any given year a dividend or share buyback will be proposed or declared or that the Company’s ﬁnancial performance will allow it to adhere to the dividend policy or any increase in the pay-out ratio. The Company’s ability to pay dividends or buy back shares may be impaired as a result of various factors. Furthermore, the dividend policy is subject to change as decided by the Board of Directors from time to time. Contact For further information, please contact: CEO Torben Paulin +45 21210464 CFO Thomas Hjannung +45 25174233 IR Contact mail: [email protected] Annual general meeting The annual general meeting will be held on Thursday, 11 April 2024 at 5 p.m. at Skautrupvej 22b, Tvis, 7500 Holstebro. Share information Exchange: Nasdaq Copenhagen Trading symbol: TCM018 Identiﬁcation number/ISIN: DK0060915478 Number of shares: 10.5 million shares of DKK 0.1 each with one vote As per the current ﬁnancing agreements with Nykredit the Group has agreed dividend Share classes: 1 Tvis Køkken restrictions linked to the ﬁnancial leverage. Sector: Kitchens, bathrooms and storage Segment: SMALL CAP M-line Mørk Eg Momento Antracit At A Glance Our business Perfomance Highlights ESG Corporate governance Financial statements ESG Statements TCM Group Annual report 2023 36 TIRANO financial statements NORDISK EG At A Glance Our business Perfomance Highlights ESG Corporate governance Financial statements ESG Statements TCM Group Annual report 2023 37 Consolidated financial statements Financial statements of the parent company 38 Consolidated income statement 38 Statement of comprehensive income 39 Consolidated balance sheet as of 31 December 40 Consolidated statement of changes in shareholders’ equity 41 Consolidated cash ﬂow statement 68 Statement of comprehensive income 68 Balance sheet as of 31 December 69 Changes in shareholders’ equity 70 Cash ﬂow statement 70 Notes to the parent ﬁnancial statements 42 Notes to the consolidated ﬁnancial statements 66 Deﬁnitions 75 Statement by Management on the annual report 75 Independent auditor’s reports At A Glance Our business Perfomance Highlights ESG Corporate governance Financial statements ESG Statements TCM Group Annual report 2023 38 Consolidated income statement statement of comprehensive income DKK’000 Note 2023 2022 DKK’000 Note 2023 2022 Revenue 4 1,111,346 (893,015) 218,331 (107,183) (61,948) 6,410 1,146,052 (915,403) 230,649 (83,379) (47,709) 3,852 Net proﬁt for the year 21,522 70,493 Cost of goods sold 5,6,8 Gross proﬁt Other comprehensive income Items that may be reclassified subsequently to profit or loss Selling expenses 5,6,8 Administrative expenses Other operating income Other operating expenses Operating proﬁt before non-recurring items Non-recurring items Operating proﬁt 5,6,7,8 Value adjustments of currency hedges before tax Tax on value adjustments of currency hedges Tax related to prior years (47) 11 (1,137) 250 0 (22) 36 0 55,610 (9,815) 45,795 2,194 103,391 (6,478) 96,913 1,263 Other comprehensive income for the year Total comprehensive income for the year 0 (887) 69,606 8,9 21,522 Share of proﬁt/loss in associated companies Financial income 10 10 1,538 441 Financial expenses (22,435) 27,092 (5,570) 21,522 (9,215) 89,401 (18,909) 70,493 Proﬁt before tax Tax for the year 11 Net proﬁt for the year Earnings per share (EPS) Earnings per share before dilution, DKK Earnings per share after dilution, DKK 21 21 2.20 2.20 7.77 7.76 At A Glance Our business Perfomance Highlights ESG Corporate governance Financial statements ESG Statements TCM Group Annual report 2023 39 Consolidated balance sheet as of 31 December Consolidated balance sheet as of 31 December DKK’000 Note 2023 2022 DKK’000 Note 2023 2022 ASSETS Intangible assets Goodwill SHAREHOLDERS’ EQUITY AND LIABILITIES 12 411,998 178,711 45,125 2,823 369,796 171,961 0 Share capital 19,21 19 1,051 (12,087) (916) 914 (12,087) (916) Brand Treasury shares Customer contract Other intangible assets Other intangible assets in progress Value adjustments of cash ﬂow hedges Retained earnings 20 1,930 541,605 0 432,718 0 33,665 672,322 12,151 555,838 Proposed dividend for the year Total shareholders’ equity 22 529,653 420,629 Tangible assets 13 Land and buildings 128,925 6,130 95,126 1,119 Deferred tax 23 3,24 3,24 3,14 3 68,032 22,726 145,346 48,150 53,393 25,060 0 Tangible assets under construction and prepayments Machinery and other technical equipment Equipment, tools, ﬁxtures and ﬁttings Right-of-use assets Mortgage loans Bank loans 53,985 7,138 42,542 5,707 Lease liabilities Other liabilities Total long-term liabilities 48,813 483 14 41,458 237,635 35,169 179,664 52,500 336,755 127,748 Financial assets Investments in associated companies 15 14 16 47,994 10,838 11,024 48,702 16,394 10,420 75,516 811,017 Mortgage loans 3,24 3,24 3,14 3 2,529 92,982 14,198 144,710 0 2,766 200,329 11,973 151,892 115 Lease receivables Bank loans Other ﬁnancial assets Lease liabilities 69,856 979,813 Trade payables Total non-current assets Inventories Raw materials and consumables Semi-ﬁnished products Finished products Liabilities to associated companies Current tax liabilities Other liabilities 1,665 3,564 51,211 0 47,818 34,885 9,834 41,075 28,647 10,980 80,702 3 77,797 584 Deferred income Total short-term liabilities Total shareholders’ equity and liabilities 334,465 1,200,873 421,849 970,227 17 92,537 Current receivables Trade receivables 25 80,585 8,488 1,919 40,984 8,312 0 Lease receivables 14 Receivables from associated companies Other receivables 23,065 1,180 21,888 2,932 Prepaid expenses and accrued income 18 115,237 13,285 74,115 4,392 Cash and cash equivalents Total current assets Total assets 221,060 1,200,873 159,209 970,227 At A Glance Our business Perfomance Highlights ESG Corporate governance Financial statements ESG Statements TCM Group Annual report 2023 40 Consolidated statement of changes in shareholders’ equity Value adjustments of cash flow hedges Share capital Share premium Treasury shares Retained earnings Proposed dividend Total equity DKK’000 Opening balance 01.01.2023 Net proﬁt for the year 914 0 (12,087) (916) 432,718 21,522 0 0 0 0 0 0 0 0 0 0 420,629 21,522 0 0 0 0 0 Other comprehensive income for the year Total comprehensive income for the year Share based incentive program Share capital increase 0 0 0 0 0 0 0 0 21,522 471 21,522 471 0 0 88,645 (88,645) 0 0 0 137 0 0 0 0 0 88,782 0 Transfer 0 0 88,645 (1,751) 541,605 Cost related to share capital increase Closing balance 31.12.2023 0 0 (1,751) 529,653 1,051 0 (12,087) (916) Opening balance 01.01.2022 Net proﬁt for the year 1,000 0 0 0 0 0 0 0 0 0 (135,976) (29) 500,292 70,493 0 54,404 419,691 70,493 (887) 0 0 0 0 (887) (887) 0 0 Other comprehensive income for the year Total comprehensive income for the year Dividend paid 0 0 0 0 0 70,493 0 0 69,606 (54,404) 104 0 (54,404) Share based incentive program Purchase of treasury shares Reduction of share capital 0 0 0 104 0 0 0 0 0 (14,368) 138,257 (12,087) 0 0 (14,368) 0 (86) 914 0 (138,171) 432,718 Closing balance 31.12.2022 (916) 420,629 At A Glance Our business Perfomance Highlights ESG Corporate governance Financial statements ESG Statements TCM Group Annual report 2023 41 Consolidated cash flow statement DKK’000 Note 2023 2022 DKK’000 Note 2023 2022 Operating activities Financing activities Interest paid Operating proﬁt 45,795 31,572 (33) 96,913 17,951 (22,435) 1,538 (9,215) 441 Depreciation/amortization Other non-cash operating items Income tax paid Interest recieved 2,113 Proceeds from loans 28 149,625 (131,040) (4,835) 0 39,628 (2,805) (4,068) (14,368) 0 (18,275) 22,430 25,481 (8,933) (2,938) (21,479) (11,451) 72,177 Repayments of loans Repayments of lease liabilities Purchase of treasury shares Rights issue, net proceeds Dividend paid 28 Change in inventories 14 Change in operating receivables Change in operating liabilities Cash ﬂow from operating activities (26,021) 80,949 77,031 0 (54,404) (44,790) (7,492) Cash ﬂow from ﬁnancing activities Cash ﬂow for the year 69,883 8,893 Investing activities Investments in tangible assets (21,621) (21,813) 188 (22,593) (10,116) 0 Investments in intangible assets Cash and cash equivalents at the beginning of the year Cash ﬂow for the year 4,392 8,893 11,884 (7,492) 4,392 Sale of tangible assets Investments in ﬁnancial assets 1 10 Cash and cash equivalents at year-end 13,285 Acquisition of operations (business combinations) Acquisition of operations (associated company) Dividends from associates 26 27 (100,791) (153) 0 Specification: (2,180) 0 Cash and cash equivalents at year-end 13,285 0 4,392 0 2,250 Cash and cash equivalents assets held for sale Cash ﬂow from investing activities Operating cash ﬂow before acquisitions of operations Operating cash ﬂow after acquisitions of operations (141,939) 39,954 (60,990) (34,879) 39,478 37,298 13,285 4,392 At A Glance Our business Perfomance Highlights ESG Corporate governance Financial statements ESG Statements TCM Group Annual report 2023 42 notes to the consolidated financial statements 1. 2. Accounting policies..............................................................................................................................................................................43 Signiﬁcant accounting estimates and judgements...................................................................................................................47 Financial risks........................................................................................................................................................................................48 Revenue and segment information ................................................................................................................................................50 Staﬀ costs................................................................................................................................................................................................50 Average number of employees during the period...................................................................................................................... 52 Audit fee................................................................................................................................................................................................... 52 Depreciation/amortization and impairment by function....................................................................................................... 52 Non-recurring items........................................................................................................................................................................... 53 Financial income and expenses....................................................................................................................................................... 53 Corporation tax .....................................................................................................................................................................................54 Intangible assets...................................................................................................................................................................................54 Tangible assets......................................................................................................................................................................................56 Leases .......................................................................................................................................................................................................56 Investments in associated companies...........................................................................................................................................58 Other ﬁnancial assets..........................................................................................................................................................................59 Inventories..............................................................................................................................................................................................59 Prepaid expenses and accrued income..........................................................................................................................................59 Share capital...........................................................................................................................................................................................59 Value adjustments of cash-ﬂow hedges.......................................................................................................................................60 Earnings per share ...............................................................................................................................................................................60 Dividend...................................................................................................................................................................................................60 Deferred tax............................................................................................................................................................................................ 61 Bank loans and mortgage loans....................................................................................................................................................... 61 Financial assets and liabilities ......................................................................................................................................................... 61 Acquisition of operations (business combinations) .................................................................................................................62 Acquisition of operations (associated companies) ...................................................................................................................64 Changes in liabilities attributable to the ﬁnancing activities................................................................................................64 Pledged assets, contingent liabilities and commitments .......................................................................................................65 Related party transactions ................................................................................................................................................................65 Events after the balance sheet date................................................................................................................................................65 Companies in the TCM Group...........................................................................................................................................................65 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. At A Glance Our business Perfomance Highlights ESG Corporate governance Financial statements ESG Statements TCM Group Annual report 2023 43 Notes to the consolidated financial statements 1. Accounting policies Principles applied in the preparation of the consolidated financial statements The consolidated ﬁnancial statements are presented in accordance with IFRS accounting standards as adopted by the EU and additional requirements of the Danish Finan- cial Statements Act. Accounting policies are unchanged compared to last year. that are considered to match the content of those line items. For line items not considered to be covered by line items deﬁned in the taxonomy, entity-speciﬁc exten- sions to the taxonomy have been incorporated. Except for subtotals, these extensions are anchored to standard elements of the ESEF taxonomy. Consistently with the requirements of the ESEF Regula- tion, the annual report approved by Management is comprised of a ZIP ﬁle tcm-group-2023-12-31-en.zip which includes an XHTML ﬁle that may be opened using standard web browsers, and a number of technical XBRL ﬁles enabling mechanical retrieval of the XBRL data incorporated. Classification, etc. Non-current assets essentially comprise amounts that are expected to be recovered more than 12 months after the balance sheet date. Current assets essentially com- prise amounts that are expected to be recovered within the 12 months after the balance sheet date. Long-term liabilities comprise amounts that TCM Group A/S has an unconditional right, to pay later than 12 months after the balance sheet date. Other liabilities comprise short- term liabilities. Business combinations Business combinations are recognized in accordance with the acquisition method. According to this method the acquired identiﬁable assets and assumed liabilities and contingent liabilities are recognised at their fair value on the acquisition date. The consideration is measured at fair value of the consideration transferred to the former owner of the acquiree. Acquisition related costs are recognized as non-recurring items in income statement as incurred. Goodwill arising from business combinations is calcu- lated as the total of the consideration transferred, any non-controlling interests and fair value of previously owned participations (for step acquisitions) less the fair value of the subsidiary’s identiﬁable assets and assumed liabilities. When the diﬀerence is negative, it is recog- nized directly in net proﬁt for the year. Contingent consideration in acquisitions is measured at fair value on both the acquisition date and continuously thereafter, with changes in value recognized in proﬁt or loss. For acquisitions of subsidiaries involving non-con- trolling interests, the Group recognizes net assets attributable to non-controlling interests either at fair value of all of the net assets except goodwill, or at fair value of all net assets including goodwill. The principle is decided individually for each acquisition. When a business combination is achieved in stages, the Group’s previously held interests in the acquired entity are remeasured to its acquisition-date fair value and the resulting gain or loss, if any, is recognised in proﬁt or loss. When controlling interests are achieved, changes in ownership are recognized as a reallocation of share- holders’ equity between the parent company’s owners and the non-controlling interest, without any remeas- urement of the subsidiary’s net assets. Implementation of new standards, amendments, and interpretations TCM Group has assessed the eﬀect of the new standards, amendments, and interpretations. TCM Group has con- cluded that all standards, amendments, and interpreta- tions eﬀective for ﬁnancial years beginning on or after 1 January 2023 are either not relevant to the Group or have no signiﬁcant eﬀect on the Financial Statements of the TCM Group. Consolidation principles and business combinations Subsidiaries Subsidiaries are companies subject to the controlling inﬂuence of TCM Group A/S. A controlling inﬂuence entails the direct or indirect right to shape a company’s ﬁnancial or operational strategies in a bid to receive ﬁnancial beneﬁts. When assessing whether a controlling inﬂuence exists, potential voting shares that can be immediately utilized or converted must be taken into account. The ﬁnancial statements of subsidiaries are included in the consolidated ﬁnancial statements from the date that the controlling interest arises and are included in the consolidated ﬁnancial statements until the date on which the controlling interest ceases. If ownership is reduced to such an extent that con- trolling interests are lost, any remaining holdings are recognized at fair value and the change in value is rec- ognized in proﬁt or loss. General principles Assets and liabilities are recognised at historic acquisi- tion value (cost), except for certain ﬁnancial assets and liabilities and non-current assets held for sale. Financial assets and liabilities measured at fair value comprise derivative instruments. Non-current assets held for sale are recognised at the lower of the carrying amount and fair value, less selling expenses. The Parent Company’s functional currency is Danish kroner (DKK), which is also the presentation currency for the Parent Company and Group. Accordingly, the consolidated ﬁnancial statements are presented in DKK. All amounts are stated in DKK thousand, unless other- wise stated. Changes in classiﬁcation Comparative ﬁgures in the income statement and bal- ance sheet items have been restated to match this year’s classiﬁcation. The adjustments of comparative ﬁgures have no eﬀect on net proﬁt and equity. Reporting under the ESEF Regulation The Commission Delegated Regulation (EU) 2019/815 on the European Single Electronic Format (ESEF Regulation) requires the use of a particular electronic reporting format for annual reports of listed companies in the EU. More spe- ciﬁcally, the ESEF Regulation requires the annual report to be prepared in XHTML format with iXBRL tagging of the consolidated ﬁnancial statements including notes. TCM Group A/S’ iXBRL tagging has been made using the ESEF taxonomy disclosed in the annexes to the ESEF Regulation and developed based on the IFRS taxonomy published by the IFRS Foundation. The line items in the consolidated ﬁnancial statements are XBRL-tagged to the elements of the ESEF taxonomy New IFRS standards that have not yet been applied A number of new or amended IFRS standards will come into eﬀect in future ﬁnancial years, and have not been applied in advance when preparing these consolidated ﬁnancial statements. There are no amendments to accounting policies with future application that are deemed to have any material eﬀect on the consolidated ﬁnancial statements. Transactions that are eliminated through consolidation Intra-group receivables and liabilities, income or expenses and unrealized gains or losses that arise from intra-group transactions between group companies, are eliminated in their entirety in the preparation of the consolidated ﬁnancial statements. At A Glance Our business Perfomance Highlights ESG Corporate governance Financial statements ESG Statements TCM Group Annual report 2023 44 Notes to the consolidated financial statements (continued) 1. Accounting policies (continued) Segment reporting An operating segment is a part of the Group that con- ducts business activities from which it earns revenue and incurs expenses and for which independent ﬁnan- cial information is available. Furthermore, the results of an operating segment are monitored by the company’s chief operating decision-maker to evaluate them and to allocate resources to the operating segment. TCM Group A/S has only one operating segment that is producing and selling kitchens, bathrooms and storage. Operating expenses (Selling and administrative expenses) Operating expenses primarily comprise selling and administrative expenses. Selling expenses include staﬀ cost, marketing cost, losses (incl. provisions for) on trade receivables, and other cost related to sales and marketing activities. Administrative expenses include staﬀ costs and other costs related to administration. Current tax is tax that is to be paid or received regarding the current year, by applying the tax rates determined or that have been determined in principle on the balance sheet date. This item also includes adjustments to cur- rent tax attributable to previous periods. Deferred tax is calculated according to the balance-sheet method on all temporary diﬀerences arising between recognized and ﬁscal values of assets and liabilities. The tax eﬀect attributable to tax loss carryforwards that could be utilized against future proﬁts is capitalized as a deferred tax asset. This applies to both accumulated loss carryforwards at the acquisition date and losses arising thereafter. Deferred tax is measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled. Deferred tax is recognized in the balance sheet as a non-current asset or long-term liability. The income tax liability is recognized as a cur- rent receivable or current liability. If the actual outcome diﬀers from the amounts ﬁrst recognized, the diﬀerences will aﬀect current tax and deferred tax in the period in which these calculations are made. and brand are subject to impairment testing annually or if an indication of an impairment requirement arises. The carrying amount comprises the cost less any accu- mulated impairment losses. A description of the method and assumptions applied when conducting impairment tests is found in note 12 Intangible Assets. Other intangible assets with deﬁnite useful life are rec- ognized at cost less accumulated amortization and any impairment. It also includes capitalized costs for pur- chases and internal and external costs for the develop- ment of software for the Group’s IT operations, patents and licenses. Amortization is calculated according to the straight-line method based on the estimated useful life of the asset (3-10 years). Share of profit/loss in associated companies In the income statement, the Group’s share of associ- ates’ results after tax and after elimination of the pro- portionate share of internal proﬁt/loss is recognized. Revenue recognition The Group sells kitchen products through a number of independent stores, DIY chains and other retailers. Rev- enue is recognised when control of goods sold has transferred to the customer, being when the goods have been delivered according to the delivery terms DAP. General credit terms vary between 8-30 days. Sales are recognized net after VAT and discounts. Financial income and expenses Financial income and expenses comprise interest income on bank balances and receivables, interest expense on loans, gain/loss on interest rate swaps as well as exchange rate diﬀerences on ﬁnancial items. Interest income on receivables and interest expense on liabilities are calculated in accordance with the eﬀective interest rate method. The eﬀective interest rate is the interest rate that results in the present value of all future receipts and disbursements during the ﬁxed-interest term becoming equal to the carrying amount of the receivable or liability. The calculation includes all fees paid or received by contractual parties that are part of the eﬀective interest rate, meaning transaction costs and surplus and deﬁcit values. Tangible assets Tangible assets are recognized at cost with deductions for depreciation and any impairment. Cost includes expenses that can be directly attributed to the acquistion. Costs for repairs and maintenance are recognized as costs in proﬁt or loss in the period in which they arise. In the event that an asset’s carrying amount exceeds its estimated recoverable amount, the asset is written down to its recoverable amount, which is charged to the income statement. Cost of goods sold Cost of goods sold include the manufacturing costs incurred to achieve revenue for the year. Costs consist of raw material, direct labour costs, in and outbound transportation costs and indirect costs related to manu- facturing such as salaries, energy and maintenance costs as well as depreciation of production facilities, and equipment. Intangible assets Goodwill comprises the amount by which the cost of the acquired operation exceeds the established fair value of identiﬁable net assets, as recognized in the acquisition analysis. In connection with the acquisition of opera- tions, goodwill is allocated to cash generating units. In connection with acquisitions the fair value of the diﬀer- ent brands have been measured respectively. Since goodwill and the Svane Køkkenet brand have an indeﬁ- nite useful life, it is not amortized. The indeﬁnite useful life is justiﬁed by the long life of the brand, where there are no intention of changing the brand set-up. Thus, it is not possible to determine a useful life. Instead, goodwill In the income statement, operating proﬁt is charged with straight-line depreciation, which is calculated on the original cost less estimated residual value after use- ful life and is based on the estimated useful lives of the assets as follows: Buildings 20–40 years Machinery and other technical equipment 3-10 years Equipment, tools, ﬁxtures and ﬁttings 2-8 years Land is not depreciated. Expected useful lives and residual values are reviewed annually. Non-recurring items Non-recurring items are applied in connection with the presentation of the proﬁt or loss for the year to distin- guish income and expenses that are special and of a non-recurring nature from the consolidated operating proﬁt for the year. Non-recurring items are assessed item by item and comprise restructuring costs, impair- ment charges in connection with e.g. material restruc- turing and other items relating to fundamental reorgan- isations as well as gains or losses on major disposals. Tax Tax costs for the year comprise current tax and deferred tax. Income taxes are recognized in the income state- ment except when the underlying transaction is recog- nized in other comprehensive income or in sharehold- ers’ equity, whereby the associated tax eﬀects are recognized in other comprehensive income or in share- holders’ equity. At A Glance Our business Perfomance Highlights ESG Corporate governance Financial statements ESG Statements TCM Group Annual report 2023 45 Notes to the consolidated financial statements (continued) 1. Accounting policies (continued) Research and product development Costs for product development are expensed immedi- ately as and when they arise. Product development within the Group is mainly in the form of design development and is conducted continu- ously to adapt to current style trends. To a large extent, product development is based on a further development of existing materials and designs, which is the reason that no portion of the costs for product development is recognized as an intangible asset. The Group does not carry out research and development in the true sense of such work, or to any signiﬁcant extent. the right-of-use asset is depreciated on a straight-line basis over the total expected useful life of the asset. The company leases vehicles which include a service element in the payments to the lessor. This service is deducted from the lease payment when measuring the lease obligation. Where the company cannot reliably separate leasing and non-leasing items, it is considered a single leasing payment. Short leases with a maximum lease term of 12 months and leases where the underlying asset has a low value are not recognized in the balance sheet. The lease obligation, which is recognized under “Lease liabilities”, is measured at the present value of the remaining lease payments, discounted by the company’s incremental loan interest rate, if the implicit interest rate is not stated in the lease agreement or can reasonably be determined. The leasing payment consist of ﬁxed and variable leasing payments that are regulated by index or interest rate, guaranteed residual values, the exercise of purchase options and the cost of cancelling the lease. The lease obligation is subsequently adjusted if: • The value of the index or interest rate on which the lease payments are based changes. • There is a change in the exercise of options to extend or shorten the lease period due to a material event or material change in circumstances which are within the control of the lessee. • The lease term is changed as a result of exercising an option to extend or shorten the lease term. • The estimate of a residual value guarantee is changed. • The contract is renegotiated or modiﬁed. Subsequent adjustment of the lease obligation is recog- nized as a correction to the right-of-use asset. However, if the right-of-use asset has a value of DKK 0, a negative reassessment of the right-of-use asset is recognized in the income statement. Lease period The company recognizes the lease obligations on the basis of the future payments during the lease period. The lease period consists of the non-cancellable period and periods covered by extension and termination options. The company rents properties for production and for retail leases. Often leases do not have a ﬁxed expiry date, but continue after the non-cancellable period until the lessee terminates the contract. The company therefore assesses whether it is reasonably certain of exercising extension options or failing to exercise termination options when determining the lease term. Retail leases are in all cases subleased to franchisees on the same terms, why the lease term is estimated to be the same period. The right-of-use assets is therefore reco- qnized as a ‘Lease receiveables’ in the balance sheet. Investments in associated companies Investments in associates are measured using the equity method, whereby the investments in the balance sheet are measured at the proportionate share of the companies’ net asset value calculated in accordance with the Group’s accounting policy after elimination of the proportionate share of unrealized internal proﬁt/loss and with addi- tion of value added on acquisition, including goodwill. Investments in associates are tested for impairment if an indication of an impairment requirement arises. Inventories Inventories comprise ﬁnished and semi-ﬁnished prod- ucts and raw materials. Inventories are valued according to the ﬁrst-in, ﬁrst-out (FIFO) principle, at the lower of the cost and net realisable value on the balance sheet date. The realisable value comprises the estimated sales price in the ongoing operations less selling expenses. Cost of ﬁnished and semi-ﬁnished products are measured at manufacturing cost including raw materials, direct labour, other direct expenses and production related overheads based on a normal production capacity. Inter-group proﬁts on inventory are eliminated in the consolidated ﬁnancial statements. Leases When entering into an agreement, the company assesses whether an agreement is a lease agreement or contains a lease element. A lease is an agreement that transfers the right to control the use of an identiﬁable asset for a period against payment. In assessing whether an agreement con- tains a lease item that has been transferred to the lessee, it is necessary to consider whether the lessee has the right, during the useful life, to obtain virtually all the economic beneﬁts from the use of the identiﬁable asset and the right to decide on the use of the the identiﬁable asset. The company recognizes a right-of-use (the asset) and a lease obligation at the start of the lease period. The right-of-use asset is measured at cost, which is cal- culated as the present value of the lease obligation plus any direct costs associated with entering the lease, any costs for demolition and disposal of the asset at the end of the lease period which the lessee is obliged to pay, and prepaid leasing payments. The right-of-use asset is depreciated on a straight-line basis over the shortest period of the lease term and the useful life of the asset. If the lease agreement contains a purchase option that the company expects to exercise, Incremental borrowing rate The company has chosen to subdivide their leases into the following categories: • Rental contracts for premises • Vehicles The borrowing rate is set at ﬁrst recognition. If the com- pany considers that a change in the residual value guar- antee, termination and renewal options, the incremental borrowing rate is revised. For the company’s vehicles, the incremental borrowing rate is calculated based on the company’s borrowing rate. This interest rate takes into account credit assess- ments, collateral, leasing periods, etc. For rental contracts for premises, the possibility of using mortgage ﬁnancing of real estate has been taken into account. Financial instruments Financial instruments recognized in the balance sheet include cash and cash equivalents, loans receivable, trade receivables and derivative instruments on the asset side. On the liability side, there are trade payables, loan liabili- ties and derivative instruments. Recognition in and derecognition from the balance sheet A ﬁnancial asset or a ﬁnancial liability is entered in the balance sheet when the company becomes a party in accordance with the contractual terms of the instrument. A receivable is recognized when the company has per- formed a service and a contractual payment obligation At A Glance Our business Perfomance Highlights ESG Corporate governance Financial statements ESG Statements TCM Group Annual report 2023 46 Notes to the consolidated financial statements (continued) 1. Accounting policies (continued) arises for the counterparty, even if an invoice has not been received. Trade receivables are recognized in the balance sheet when revenue is recognized and an invoice has been issued. A liability is recognized when the coun- terparty has performed a service and a contractual pay- ment obligation arises, even if an invoice has not been received. Accounts payables are recognized when a ser- vice or product has been received. A ﬁnancial asset is derecognized from the balance sheet when the rights resulting from the agreement have been realized, expire or the company loses control over them. The same applies to a part of a ﬁnancial asset. A ﬁnan- cial liability is derecognized from the balance sheet when the obligation resulting from the agreement has been realized or is extinguished in some other manner. The same applies to a part of a ﬁnancial liability. A ﬁnancial asset and a ﬁnancial liability may only be oﬀset against each other and recognized net in the bal- ance sheet if there is a legal right to oﬀset the amounts and the intention is to settle the items in a net amount or to simultaneously sell the asset and settle the debt. The acquisition or divestment of ﬁnancial assets is rec- ognized on the date of transaction for on demand trans- actions, which is the date when the company undertakes to acquire or sell the asset. Receivables and liabilities in foreign currencies Receivables and liabilities in foreign currencies are val- ued at the balance sheet date rate. Exchange rate ﬂuctu- ations pertaining to operating receivables and liabilities are recognized in operating proﬁt, while exchange rate ﬂuctuations pertaining to ﬁnancial receivables and lia- bilities are recognized in net ﬁnancial items. Cash-ﬂow hedges, interest-rate risk Interest swaps can be used to hedge the uncertainty of highly probable forecasted interest-rate ﬂows for bor- rowing at variable interest, whereby the company receives variable interest and pay ﬁxed interest. Interest rate swaps are measured at fair value in the balance sheet. The interest coupon portion is continuously rec- ognized in proﬁt or loss as a portion of interest expense. Unrealized changes in fair value of interest rate swaps are recognized in other comprehensive income and are included as a portion of the hedging reserve until the hedged item impacted net proﬁt for the year and as long as the criteria for hedge accounting and eﬀectiveness are fulﬁlled. The gain or loss attributable to the ineﬀec- tive portion of unrealized changes in value of interest rate swaps is recognized in proﬁt or loss. calculated annually. When testing for impairment requirements, if it is not possible to establish essentially independent cash ﬂows for an individual asset, the assets must be grouped at the lowest level at which it is possible to identify essentially independent cash ﬂows, known as cash generating units. Impairment losses are recognized when the carrying amount of an asset or a cash generating unit (group of units) exceeds the recoverable amount. Impairment losses are charged against proﬁt or loss. Impairment losses related to assets attributable to a cash generating unit are primarily allocated to goodwill. Subsequently, a proportional impairment of other assets included in the unit (group of units) is eﬀected. The recoverable amount is the higher of fair value less selling expenses and value in use. When calculating the value in use, future cash ﬂows are discounted using a discounting factor that takes into account the risk-free interest rate and the risk associated with the speciﬁc asset or cash generating unit (group of units). Loans and trade receivables The category of loans and trade receivables comprises ﬁnancial assets that are not derivative instruments, that have ﬁxed or ﬁxable payments and that are not listed on an active market. For TCM Group A/S, this category includes long-term ﬁnancial assets and trade receiva- bles and other receivables recognized as current assets. These assets are valued at amortized cost. Amortized cost is determined based on the eﬀective rate calculated on the acquisition date. Loans and trade receivables are recognized at the amounts that are expected to be received, meaning less any provisions for decreases in value. Receivables with short maturities are not discounted. Derivative ﬁnancial instruments On initial recognition in the balance sheet, derivate ﬁnancial instruments are measured at cost and subse- quently at fair value. Derivative ﬁnancial instruments are recognized under other receivables or other payables. Changes that are complying with requirements for hedging of future cashﬂow of a recognized asset or a recognized liability are recorded in the other compre- hensive income statement. Cash and cash equivalents Cash and cash equivalents are deﬁned as cash and bank balances and short-term investments with maturities not exceeding three months from the acquisition date. Impairment of ﬁnancial assets Trade receivables are recognised initially at their trans- action price less allowance for expected credit losses over the lifetime of the receivable and are subsequently measured at amortised cost adjusted for changes in expected credit losses. The expected credit losses on trade receivables are estimated based on the level of unsecured balances past due. The Group has historically experienced insigniﬁcant credit losses. Receivables, for which the Group has no reasonable expectation of recovery, are written oﬀ in part or entirely. The allowances for expected credit losses and write-oﬀs for trade receivables are recognised in proﬁt or loss and included in administrative expenses. Financial liabilities All transactions pertaining to ﬁnancial liabilities are recognized on the settlement date. Liabilities (except for derivative instruments with negative values) are meas- ured at amortized cost. Financial liabilities related to contingent payment obli- gations are initially measured at fair market value based on the estimated future performance of the acquired entity. These assumptions are then reviewed at each balance sheet date and the contingent payment obliga- tion adjusted accordingly with the adjustment being charged to other income / other expenses. Measurement Financial instruments that are not derivative instru- ments are initially recognized at cost corresponding to the instrument’s fair value plus transaction costs. Transaction costs for derivative instruments are imme- diately expensed. On initial recognition, a ﬁnancial instrument is classiﬁed on the basis of the purpose underlying the acquisition of the instrument. This clas- siﬁcation determines how the ﬁnancial instrument is measured after initial recognition, in the manner described below. For the recognition of derivative instruments, refer to cash-ﬂow hedges below. Impairment The carrying amounts of the Group’s assets are tested annually for indications of any impairment requirement. IAS 36 is applied to the impairment testing of assets other than ﬁnancial assets, which are tested according to IFRS 9 inventories and deferred tax assets, if any. Impairment testing of tangible and intangible assets If there is an indication of an impairment requirement, the recoverable amount of the asset is tested in accord- ance with IAS 36 (see below). For goodwill and assets with indeﬁnite life e.g. brand, the recoverable amount is At A Glance Our business Perfomance Highlights ESG Corporate governance Financial statements ESG Statements TCM Group Annual report 2023 47 Notes to the consolidated financial statements (continued) 2. Significant accounting estimates and judgements Preparing the consolidated ﬁnancial statements in accord- ance with IFRS requires that Management makes assess- ments, estimates and assumptions that aﬀect the applica- tion of accounting policies and the recognized amounts of assets, liabilities, income and expenses. The actual outcome may diﬀer from these estimates and assessments. Esti- mates and assumptions are regularly reviewed. Changes to estimates are recognized in the period in which the change is made if the change aﬀects only that period, or in the period in which the change is made and future periods if the change aﬀects both current periods and future periods. Assessments made by Management in the application of IFRS that have a material impact on the consolidated ﬁnan- cial statements and estimates made that may lead to signif- icant adjustments in the consolidated ﬁnancial statements of future ﬁnancial years are primarily the following: 1. Accounting policies (continued) Impairment reversal An impairment loss on assets that come under the scope of IAS 36 is reversed if there is an indication that the impairment is no longer pertinent and that there has been a change in the assumptions upon which the calcu- lation of the recoverable amount was based. However, an impairment loss on goodwill and brand with undeﬁnite useful life is never reversed. A reversal is only performed to the extent that the carrying amount of the asset after the reversal does not exceed the carrying amount that would have been recognized, less depreciation wherever applicable, if no impairment had been posted. An impairment loss on loans and trade receivable recog- nized at amortized cost is reversed if the previous rea- sons for the impairment loss no longer exist and full payment can be expected to be received from the customer. Statement of cash flows The cash ﬂow statement shows the cash ﬂows from operating, investing and ﬁnancing activities for the year, the year’s changes in cash and cash equivalents as well as cash and cash equivalents at the beginning and end of the year. The cash ﬂow eﬀect of acquisitions and disposals of businesses is shown separately in cash ﬂows from investing activities. Cash ﬂows from acquired businesses are recognized in the cash ﬂow statement from the date of acquisition, and cash ﬂows from disposed businesses are recognized up until the date of disposal. Cash ﬂows from operating activities are calculated according to the indirect method as operating proﬁt adjusted for non-cash operating items, changes in working capital, and corporation tax paid. Cash ﬂows from investing activities comprise payments in connection with acquisitions and disposals of entities and operations and of intangible and tangible assets and other non-current assets as well as dividend received. Cash ﬂows from ﬁnancing activities comprise changes in the size or composition of the share capital and related costs as well as the raising of loans, repayment of interest-bearing debt, interest and payment of divi- dends to shareholders. price and the share price. For the options, the exercise price is added the value of future services. Employee benefits Long-term remuneration The Group operates schemes for remuneration to employees for long service. The obligation is deemed insigniﬁcant and the Group, therefore, recognizes the expense at the time of the anniversary. The Group has an equity-settled, share-based Long- term Incentive program (LTI) for the Executive Man- agement, which is governed by the Remuneration policy. The LTI is a share-based program and consists of annual commencing individual Performance Share Unit Plans (PSU) with rolling 3 year performance periods. The fair value of employee services received for the grant of shares is recognised as an expence and allocated over the vesting period. And the end of each reporting period, TCM revises its estimates of the numbers of shares expected to vest. TCM recognises the impact of the revi- sion of original estimates, if any, in the income state- ment and in a corresponding adjustment to equity over the remaining vesting period. Adjustments relating to prior years are included in the income statement in the year of adjustment. Impairment testing of goodwill and brand Goodwill and brand with indeﬁnite useful life are recog- nized at cost less any accumulated impairment. The Group performs annual impairment tests of goodwill and brand in accordance with the accounting policies. The assumptions and assessments made pertaining to expected cash ﬂows and the discount rate in the form of weighted average cost of capital are described in note 12. Contingent liabilities A contingent liability is disclosed when the Company has a possible obligation deriving from an occurred event whose existence will be conﬁrmed only by one or more uncertain future events, or when there is an obligation that has not been recognized as a liability or provision because it is not probable that an outﬂow of resources will be required, or alternatively because it is not possi- ble to suﬃciently reliably estimate the amount concerned. Acquisition of entities In applying the acquisition method of accounting, esti- mates are an integral part of assessing fair values of several identiﬁable assets acquired and liabilities assumed, as observable market prices are typically not available. Valua- tion techniques where estimates are applied typically relate to determining the present value of future uncertain cash ﬂows or assessing other events in which the outcome is uncertain at the date of acquisition. Signiﬁcant estimates are typically applied in accounting for intangible assets, deferred tax, contingent consideration, and contingent lia- bilities. Also, the fair value of earn-outs as part of the total purchase price is based on management’s assessment of the most probable outcome to materialise in future years. As a result of the uncertainties inherent in fair value esti- mation, measurement period adjustments may be applied. Short-term remuneration Short-term remuneration to employees is calculated without discounting and is recognized as a cost when the related services are obtained. A provision is recog- nized for the anticipated cost of bonus payments when the Group has a current legal or contractive obligation to make such payments, based on the services being obtained from the employees and it being possible to reliably estimate the obligation. Shareholders’ equity Dividends Dividends are recognized as a liability after the Annual General Meeting has approved the dividend. Earnings per share The calculation of earnings per share is based on consol- idated net proﬁt attributable to the Parent Company shareholders and on the weighted average number of shares outstanding during the year. When calculating earnings per share after dilution, the average number of shares outstanding is adjusted to take into account the dilutive eﬀects of potential ordinary shares including employee share options. The options are dilutive if the exercise price is lower than the share price. Dilution is greater, the greater the diﬀerence between the exercise Treasury shares The treasury share reserve comprises cost of acquisition for the Group’s portfolio of treasury shares. Dividends received from treasury shares are recognised directly in retained earnings in equity. Gains and losses from the sale of treasury shares are recognised in share premium. At A Glance Our business Perfomance Highlights ESG Corporate governance Financial statements ESG Statements TCM Group Annual report 2023 48 Notes to the consolidated financial statements (continued) 3. Financial risks Foreign exchange risk TCM Group A/S has limited currency exposure and risk related to sales in NOK. In accordance with the Groups foreign currency policy forward contracts are used to mitigate such risks. As such Forward contracts are used to hedge between 70-100% of the expected cash-ﬂows in NOK on a 6-month rolling basis. Based on the net position (trade receivables and bank deposits less trade payables) in NOK as of the balance sheet date, a 10% change in the year-end rate would impact net proﬁts and equity by DKK 3.7 million. Apart from NOK, revenue is only invoiced in DKK, and purchases are mainly in DKK or EUR. Due to the current DKK-EUR ﬁxing EUR cash-ﬂows related to purchases were not hedged during the year. Purchase related cashﬂows in other currencies than DKK and EUR amounted to DKK 21 million (DKK 4 million) and were not hedged during the year Actual losses on trade receivables in 2023 amounted to DKK 8.9 million (DKK 0.9 million) primarily related to bankruptices of four stores in Denmark and Norway. In addition we have, due to the market situation and a higher overdue amounts, increased provisions for possi- ble losses on trade receivables by DKK 5.9 million. Total expensed actual losses and increae in provisions amounts to DKK 14.8 million equal to 1.3% of net reve- nue for the year. 31 December 2024. There has been no breach of any cov- enant during the period. Mortgage loans with a nominal amount of DKK 25 mil- lion (DKK 28 million) are amortised over 20 years and expire in 2032. The interest rates of mortgage loans are variable. Credit risk TCM Group A/S’ customer base comprises professional customers. Credit management and payment terms are monitored for each customer group. Credit assessments are continuously performed on customers who make regular purchases. Credit insurance, bank guarantees and other collateral are utilized for the diﬀerent markets and customer categories. Interest-rate risk It is group policy to hedge interest rate risks on loans when it is assessed that the debt is material. The group manages interest rate risk by maintaining an appropri- ate mix between ﬁxed and ﬂoating rate borrowings, and by use of interest rate swap contracts. The interest rates on the Nykredit facilities and the mortgage loans are currently variable. For the Group’s ﬂoating rate cash and cash equivalents and debt to banks, an increase in interest rate level of 1% p.a. relative to the actual interest rates would have a negative impact on the proﬁt for the year and on equity at 31 December 2023 of DKK 2.9 million (DKK 2.2 million). Financial exposure and Liquidity risk The Group in 2022 entered into a facility agreement with Nykredit Bank comprising a committed facility of DKK 200 million. The agreement initially included a 3-year commitment plus an option to extend the facility with two 1-year options on similar terms, of which the Group in 2023 exercised the ﬁrst 1-year option. In connection with the acquisition of AUBO Production A/S the facility was increased to by DKK 20 million to DKK 220 million. In addition, the Group in March 2023 entered into a one year un-committed facilty agreement with Nykredit Bank of DKK 100 million. After the balance sheet date the one year un-committed facility has been renewed to March 2025 as a DKK 50 million facility. In connection with the acquisition of AUBO Production A/S, the Group entered into a 3-year committed facility agreement with Nykredit Bank of DKK 150 million. The facility agreement includes two 1-year extension options on similar terms. The facilities had an unused amount of DKK 234 million at 31 december 2023, and further DKK 13 million in avail- ble cash. Based on our scenarios for 2024, the current credit facilities provides suﬃcient headroom, and the forecasted leverage will be within the covenants agreed in the credit facility agreements, even with a decrease of 30% in EBITDA compared to budget. The facility agreements with Nykredit Bank contains a leverage covenant of 5.0 until 30 June 2024 and 4.5 until Age analysis, trade receivable 2023 2022 DKK’000 DKK’000 Trade receivables before impairment Non-due trade receivable 72,615 32,209 Past due trade receivable 0-30 days 6,204 4,036 Past due trade receivable 30-90 days 2,008 2,335 Past due trade receivable >90 days 9,279 6,022 Trade receivables before impairment 90,106 44,602 Of which overdue 17,491 12,393 Overdue secured 3,108 4,036 - Impaired 0 0 Total overdue secured after impairment 3,108 4,036 Overdue unsecured 14,383 8,357 - Impaired (9,521) (3,618) Total overdue unsecured after impairment 4,862 4,739 Impairment loss recognized in the income statement during the period 8,869 861 Assumptions for analysis of interest-rate sensitivity The stated sensitivities are calculated on the basis of the recognized ﬁnancial assets and liabilities at 31 December 2023. No adjustments have been made for instalments, raising of loans, etc. during the course of the year. The computed expected ﬂuctuations are based on the current market situation and expectations for the mar- ket developments in the interest rate level. Capital management The Board of Directors has adopted a dividend policy with a target payout ratio of 40-60 percent of consoli- dated net proﬁt for the year, however subject to the overall ﬁnancial prosition and leverage. At A Glance Our business Perfomance Highlights ESG Corporate governance Financial statements ESG Statements TCM Group Annual report 2023 49 Notes to the consolidated financial statements (continued) 3. Financial risks (continued) Fair value hierarchy of financial instruments measured at fair value in the balance sheet Interest rate swaps are valued using an income approach (discounted cash ﬂow). Expected future cash ﬂows are based on relevant observable swap rates and discounted using a discount rate that reﬂects the credit risk of the relevant counterparties (level 2). The classiﬁcation of ﬁnancial instruments measured at fair value is disaggregated in accordance with the fair value hierarchy: • Quoted prices in an active market for identical instruments (level 1) • Quoted prices in an active market for similar assets or liabilities or other valuation methods where all signiﬁcant inputs are based on observable market data (level 2) • Valuation methods in which any signiﬁcant input is not based on observable marked data (level 3) MATurity structure, financial and operational liabilities - undiscounted cash flows Nominal amount, 5 years functional 0-6 6-12 1-5 or DKK million currency months months years later Total 2023 Bank loans 238.3 100.8 5.4 160.6 0.0 266.7 Mortgage loans 25.3 1.7 1.7 13.1 13.0 29.4 Lease liabilities 62.3 8.4 8.4 34.4 23.3 74.5 Trade payables 144.7 144.7 0.0 0.0 0.0 144.7 Other liabilities 130.3 71.3 7.4 60.1 0.0 138.8 Financial and operational liabilities at 31 December 2023 326.9 22.8 268.1 36.3 654.1 The majority shareholder of Celebert ApS has a put option for the 55% shares in Celebert ApS. Based on the latest annual report of Celebert ApS the put option has a gross value of approximately DKK 16 million. Management estimates that the fair market value of the put option equals the gross value. Nominal amount, 5 years functional 0-6 6-12 1-5 or DKK million currency months months years later Total 2022 Bank loans 200.3 1.3 1.3 203.6 0.0 206.2 Mortgage loans 27.8 1.5 1.5 11.8 14.6 29.4 Lease liabilities 60.8 6.2 6.2 28.8 22.1 63.3 Trade payables 151.9 151.9 0.0 0.0 0.0 151.9 Other liabilities 51.7 47.5 3.6 0.6 0.0 51.7 Financial and operational liabilities at 31 December 2022 208.4 12.6 244.8 36.7 502.5 Carrying amount of derivative financial instruments: 2023 2022 DKK’000 DKK’000 Hedging – currency ﬂuctuation (level 2) 1,220 (1,173) Contingent payment obligation, AUBO Production A/S (level 3) 17,500 0 18,720 (1,173) The fair value of ﬁnancial assets and ﬁnancial liabilities measured at amortised cost is approximately equal to carrying amount, due to the short maturity of ﬁnancial assets and the ﬂoating rate of the ﬁnancial liabilities. At A Glance Our business Perfomance Highlights ESG Corporate governance Financial statements ESG Statements TCM Group Annual report 2023 50 Notes to the consolidated financial statements (continued) 4. Revenue and segment information 5. Staff Costs Total costs for employee benefits DKK’000 2023 2022 Salaries and other remuneration 207,697 220,387 Social security costs 4,760 5,736 Pension costs – deﬁned contribution plans 18,470 17,356 Other staﬀ costs 270 445 Total costs for employees 231,197 243,924 The average number of employees and number of men and women among Board members and Executive Management are described in note 6. The Group’s business activities are managed within a single operating segment that is producing and selling kitchens, bathrooms and storage. Kitchens and related products cover products for kitchen. The result of the operating segment is monitored by the Group’s management to evaluate it and to allocate resources. Revenue Intangible Revenue Intangible from and tangible from and tangible customers assets customers assets DKK’000 2023 2023 2022 2022 Geographic areas Denmark 942,655 858,082 1,032,496 735,502 Norway 155,844 51,875 97,831 0 Other countries 12,847 0 15,725 0 1,111,346 909,957 1,146,052 735,502 Remuneration and other benefits Base Variable Variable salary, remunera- remunera- Directors tion, cash tion, share Other Pension Number of DKK’000 fees based (STI) based (LTI) benefits costs Total individuals 2023 Board of Directors 2,625 0 0 0 0 2,625 7 Executive Management 4,561 1,000 425 398 447 6,831 2 Total 7,186 1,000 425 398 447 9,456 9 2022 Board of Directors 2,375 0 0 0 0 2,375 6 Executive Management 4,642 317 48 648 398 6,053 2 Total 7,017 317 48 648 398 8,428 8 DKK’000 2023 2022 Revenue by category Revenue, core business 830,792 839,719 Revenue, 3rd party 280,554 306,333 1,111,346 1,146,052 Revenue consists of sale of goods and services. In 2023 two single customers, with a revenue of respectively DKK 181 million (2022: DKK 142 million) and DKK 150 million (2022: DKK 175 million), individually exceed 10% of revenue. In 2022 one additional customer, DKK 134 mil- lion, exceeded 10% of revenue. These revenues are attributed to the kitchens, bathrooms and storage segment. At A Glance Our business Perfomance Highlights ESG Corporate governance Financial statements ESG Statements TCM Group Annual report 2023 51 Notes to the consolidated financial statements (continued) 5. Staff Costs (continued) Employees including the Board of Directors and Executive Management have the opportunity to buy kitchens, bath- rooms and storage at a discounted price. The purchases are done indirectly through an independent store. The total value of the purchases made by the Board of Directors and Executive Management was DKK 25 thousand (DKK 34 thousand) during the year. The remuneration report for the Board of Directors and the Executive Management is available on TCM Group´s website. 2023 2022 Number of performance share units As at 1 January 27,170 15,989 Granted during the year 38,596 17,427 Exercised during the year 0 0 Forfeited during the year 0 (6,246) As at 31 December 65,766 27,170 Board of Directors Remuneration to members of the Board of Directors is determined by resolutions taken at the Annual General Meeting. Executive Management Executive Management, which in 2023 in averaged totals 2 individuals, received salaries and pension contributions during the ﬁscal year amounting to DKK 5.0 million (DKK 5.0 million) plus variable remuneration and other beneﬁts amounting to a total salary for 2023 of DKK 6.8 million (DKK 6.1 million). In addition to basic salary, Executive Management has a Short-term Incentive program (STI) and a Long-term Incen- tive program (LTI) which is governed by the Remuneration policy. The STI for 2023 is capped at up to 50% of the annual basic salary and is based on annual KPIs. The bonus criterias for the STI are revenue, EBITDA and NWC ratio. The STI includes a threshold for the EBITDA target which, if not achieved, will result in no STI bonus to be paid, regardless of performance on other KPIs. The LTI program is entirely granted to Executive Management and consists of annually commencing individual Per- formance Share Unit Plans with rolling three year performance periods for the periods 2021-2023, 2022-2024 and 2023-2025. When the LTI program is granted to the participants, a maximum of 50% of the annual basic salary is con- verted to a maximum number of performance share units based on the current share price e.g. an avarage over a 3 month period. At the end of each performance period, the performance share units may be converted into shares in TCM Group A/S, which will be granted free of charge. The performance measures for the LTI are all three-year accu- mulative and consist of absolute total shareholder return of the Company’s share, EBITDA, and carbon emission reduction. The fair value of the LTI program is estimated on an annual basis. No performance share units expired during the periods covered by the above tables. 2023 2022 Performance Share Units outstanding at the of the year have the following expiry dates: 31 March 2024 9,743 9,743 31 March 2025 17,427 17,427 31 March 2026 38,596 0 Total 65,766 27,170 Weighted average remaining contractual life of Performance share units outstanding at end of the period 1.69 1.89 Estimated Estimated exercise exercise DKK’000 2023 ratio 2022 ratio Fair value at 31 December: Granted in 2021 275 20% 483 35% Granted in 2022 312 28% 312 28% Granted in 2023 1,102 73% 0 n.a. Total 1,689 795 Fair value is estimated based on an estimate of the expected exercise ratio out of the maximum number of Performance Share Units and the share price when the LTI program was granted (share price in 2022: DKK 39) At A Glance Our business Perfomance Highlights ESG Corporate governance Financial statements ESG Statements TCM Group Annual report 2023 52 Notes to the consolidated financial statements (continued) 6. Average number of employees during the period 2023 2022 Average number of employees 445 496 Board members 7 6 Of which women 3 1 Executive Management 2 2 Of which women 0 0 The Board of Directors consists of 7 members in total at the date of approval of these consolidated ﬁnancial statements. 8. Depreciation/amortization and impairment by function Depreciation/ Depreciation/ amortization Impairment amortization Impairment DKK’000 2023 2023 2022 2022 Cost of goods sold 18,772 0 14,567 0 Selling expenses 4,330 3,352 964 0 Administrative expenses 3,207 0 2,421 0 Non-recurring items 0 1,911 0 0 Total depreciation/amortization and impairment 26,309 5,263 17,952 0 7. Audit fee In addition to statutory audit, PricewaterhouseCoopers Statsautoriseret Revisionspartnerselskab, the auditors appointed at the Annual General Meeting, provides other assurance engagements and other services to the Group. DKK’000 2023 2022 Specification by type of costs Statutory audit 1,448 675 Other assurance engagements 52 0 Tax and indirect taxes advisory 181 0 Other services 663 0 2,344 675 The fee for non-audit services delivered by PricewaterhouseCoopers Statsautoriseret Revisionspartnerselskab to the Company amounted to DKK 0.9 million in 2023 and consisted of various services, including due diligence in connection with the AUBO Production A/S acquisition. In 2022, the fee for non-audit services delivered by PricewaterhouseCoop- ers Statsautoriseret Revisionspartnerselskab to the Company amounted to DKK 0.0 million. At A Glance Our business Perfomance Highlights ESG Corporate governance Financial statements ESG Statements TCM Group Annual report 2023 53 Notes to the consolidated financial statements (continued) 9. Non-recurring items DKK’000 2023 2022 Transaction costs related to business combinations 2,800 0 Impairment of ERP Project, AUBO Production A/S 1,911 0 Costs related to Covid-19 and supply chain disruptions 0 5,440 Restructuring 5,104 4,658 Net gain from the Celebert/kitchn.dk transaction 0 (3,620) Total 9,815 6,478 10. Financial income and expenses DKK’000 2023 2022 Financial income Interest income on ﬁnancial assets measured at amortized costs 1,329 86 Interest income on discounted subleases 209 355 Financial expenses Interest expense on liabilities measured at amortized costs (20,329) (8,493) Interest expenses on discounted lease liabilities (2,106) (722) Total (20,897) (8,774) Below is how the income statement (extract) would have been presented if there were not adjusted for non-recurring items: DKK’000 2023 2022 Revenue 1,111,346 1,146,052 Cost of goods sold (895,364) (921,643) Gross profit 215,982 224,409 Selling expenses (109,073) (80,188) Administrative expenses (67,523) (52,200) Other operating income 6,410 4,892 Operating proﬁt 45,796 96,913 TCM Group presents non-recurring items separately to ensure comparability. Non-recurring items consist of income and expenses that are special and of a non-recurring nature. For 2023 non-recurring items consist of transaction costs related to business combinations, restructuring costs related to organisational restructuring carried out during 2023 and impairment of ERP Projekt, AUBO Production A/S. At A Glance Our business Perfomance Highlights ESG Corporate governance Financial statements ESG Statements TCM Group Annual report 2023 54 Notes to the consolidated financial statements (continued) 11. Corporation tax Other Total comprehen- comprehen- Income sive sive DKK’000 statement income income Tax for the year can be specified as follows: Current tax 7,297 (47) 7,250 Change in deferred tax during the year (1,727) 0 (1,727) Total 5,570 (47) 5,523 Tax for the previus year can be specified as follows: Current tax 19,140 250 19,390 Change in deferred tax during the year (231) 0 (231) Total 18,909 250 19,159 Reconciliation of the eﬀective tax rate for the period can be speciﬁed as follows: DKK’000 % 2023 % 2022 Tax rate 22.0 5,960 22.0 19,668 Non-taxable income (2.6) (703) (0.3) (278) Non-deductible expenses 3.0 808 0.1 49 Other (1.8) (495) (0.6) (530) Eﬀective tax rate for the year 20.6 5,570 21.2 18,909 Non-taxable income primarily relates to result of associated companies and non-deductible expenses primarily relates to transaction costs in connection with acquisitions. 12. Intangible assets Other Other intangible Customer intangible assets in DKK’000 Goodwill Brand contract assets progress Opening cost at 1 January 2023 369,796 171,961 0 51,718 12,151 Acquisition of operations 45,554 7,500 47,500 428 3,044 Investments for the period 0 0 0 49 21,764 Transfer 0 0 0 1,383 (1,383) Closing cost amount at 31 December 2023 415,350 179,461 47,500 53,578 35,576 Opening amortization and impairment at 1 January 2023 0 0 0 49,788 0 Amortization for the period 0 750 2,375 0 0 Depreciation for the period 0 0 0 967 0 Impairment for the period 3,352 0 0 0 1,911 Closing amortization and impairment at 31 December 2023 3,352 750 2,375 50,755 1,911 Closing carrying amount at 31 December 2023 411,998 178,711 45,125 2,823 33,665 At A Glance Our business Perfomance Highlights ESG Corporate governance Financial statements ESG Statements TCM Group Annual report 2023 55 Notes to the consolidated financial statements (continued) 12. Intangible assets (continued) Acquired goodwil in 2023 relates to the acquisition of AUBO Production A/S, DKK 42.2 million, and goodwill arising from the acquisition of Svane Alnabru AS DKK 3.4 million. Due to the historic ﬁnancial performance of Svane Alnabru AS the goodwill identiﬁed upon acquisition was fully impaired as of the acquisition date, and has been recognized as part of selling expenses. Goodwill is subject to an annual impairment test by calculating the expected recoverable amount of the CGU. The recoverable amount is calculated as the expected cash ﬂow discounted by a weighted average cost of capital (WACC) after tax for the CGU. The recoverable amount, calculated in conjunction with this, is compared with the carrying amount, for the CGU. The start- ing point of the calculation is the estimated future cash ﬂows based on the ﬁnancial budget for the forthcoming ﬁscal year. A forecast for the next four years is prepared based on this budget and expectations regarding market trends in the years ahead, which reﬂects previous experience. When calculating the expected cash ﬂow, signiﬁcant assumptions applied include expected demand, growth in net sales, operating margin and working capital and CAPEX requirements. Various macro economic indicators, including but not lim- ited to data related to sales of residential properties in the markets where the Group operates, are used to analyse the busi- ness climate, as well as external and internal analysis of these. The assumptions are also based on the impact of the Group’s long-term strategic initiatives, comprising the diﬀerentiated brands, central sourcing, manufacturing and product develop- ment. In order to extrapolate the cash ﬂows beyond the ﬁrst ﬁve years, a growth rate of 2% (2%) is applied. The weighted average cost of capital is calculated on the average debt/equity ratio for large companies in similar industries and costs of debt and equity. The cost of share holders’ equity is determined on the basis of the assumption that all investors require at least the same level of return as for risk-free government bonds, with an additional risk premium for the estimated risks assumed when they invest in cash generating units. The required return on debt ﬁnanced capital is also calculated on the return on risk-free government bonds and by applying a borrowing margin based on an estimated company-speciﬁc risk. The current tax rate of 22% is applied. In 2023, the Group’s weighted cost of capital before tax amounted to 12.0% (12.3%) and after tax 9.9% (9.6%). The acquisition value of the Svane Brand, DKK 172.0 million, is subject to an annual impairment test by a relief from royalty test. The recovarable amount is calculated based on the expected cash ﬂow based on the budget for the forthcoming ﬁscal year and a forecast for the next four years, a royalty of the expected brand revenue, discounted by a weighted avarage cost of capital (WACC) after tax. WACC is based on similer assumptions as with regards to the above. The recoverable amount is compared with the carrying amount. The acquisition value of the AUBO brand is amortized over the expected useful life which has been set at 5 years. Apart from the impairment of goodwill related to Svane Alnabru AS, testing of goodwill and brand did not lead to any impair- ment in 2023 or 2022. In management’s assessment, likely changes in the basic assumptions will not lead to the carrying amount exceeding the recoverable amount. Other Other intangible Customer intangible assets in DKK’000 Goodwill Brand contract assets progress Opening cost at 1 January 2022 369,796 171,961 0 50,831 2,922 Investments for the period 0 0 0 500 9,616 Transfer 0 0 0 387 (387) Closing cost amount at 31 December 2022 369,796 171,961 0 51,718 12,151 Opening amortization and impairment at 1 January 2022 0 0 0 49,192 0 Amortization for the period 0 0 0 0 0 Depreciation for the period 0 0 0 596 0 Impairment for the period 0 0 0 0 0 Closing amortization and impairment at 31 December 2022 0 0 0 49,788 0 Closing carrying amount at 31 December 2022 369,796 171,961 0 1,930 12,151 Impairment testing of goodwill and brand At the end of 2023, recognized goodwill amounted to DKK 412.0 million (DKK 369.8 million) and recognized brand value amounted to DKK 178.7 million (DKK 172.0 million). Goodwill is allocated to a cash generating unit (CGU) when the unit is acquired. TCM Group A/S currently has two CGU’s - TCM Group from the acquistion of TCM Group in 2016, and AUBO from the acquisition of AUBO Production A/S in 2023. Both CGU’s are part of the Groups operating segment “Producing and selling kitchens, bathrooms and storage”. At A Glance Our business Perfomance Highlights ESG Corporate governance Financial statements ESG Statements TCM Group Annual report 2023 56 Notes to the consolidated financial statements (continued) 13. Tangible assets Tangible Equipment, Land and assets under Machinery tools, land construction and other fixtures improve- and technical and DKK’000 Buildings ments prepayments equipment fittings Opening cost at 1 January 2023 94,484 12,405 1,119 65,588 10,413 Acquisition of operations 30,811 1,777 0 11,499 2,811 Investments for the period 4,088 66 6,130 10,621 716 Transfer 0 0 (1,119) 1,119 0 Disposals for the period 0 0 0 0 (419) Closing cost amount at 31 December 2023 129,383 14,248 6,130 88,828 13,521 Opening depreciation and impairment at 1 January 2023 11,762 0 0 23,046 4,706 Disposals for the period 0 0 0 0 (335) Depreciation for the period 2,943 0 11,797 2,012 Closing depreciation and impairment at 31 December 2023 14,705 0 0 34,843 6,383 Closing carrying amount at 31 December 2023 114,678 14,248 6,130 53,985 7,138 Opening cost at 1 January 2022 80,037 6,988 11,773 56,020 6,616 Investments for the period 5,459 5,416 1,119 6,792 3,806 Transfer 8,988 0 (11,773) 2,786 Disposals for the period 0 0 (10) (9) Closing cost amount at 31 December 2022 94,484 12,405 1,119 65,588 10,413 Opening depreciation and impairment at 1 January 2022 9,711 0 0 13,496 3,329 Disposals for the period 0 0 0 (10) 0 Depreciation for the period 2,051 0 0 9,560 1,377 Closing depreciation and impairment at 31 December 2022 11,762 0 0 23,046 4,706 Closing carrying amount at 31 December 2022 82,722 12,405 1,119 42,542 5,707 No impairment was charged to tangible assets in 2023 or 2022. 14. Leases Right-of-use assets Equipment, tools, Rental of fixtures and DKK’000 premises fittings Total Opening cost at 1 January 2023 41,430 9,791 51,221 Acquisition of operations 8,198 185 8,383 Additions 644 2,751 3,395 Disposals for the period 0 (1,719) (1,719) Closing cost amount at 31 December 2023 50,272 11,008 61,280 Opening depreciation and impairment at 1 January 2023 9,429 6,623 16,052 Disposals for the period 0 (1,719) (1,719) Depreciation for the period 3,327 2,162 5,489 Closing depreciation and impairment at 31 December 2023 12,756 7,066 19,822 Closing carrying amount at 31 December 2023 37,516 3,942 41,458 Equipment, tools, Rental of fixtures and DKK’000 premises fittings Total Opening cost at 1 January 2022 14,933 8,631 23,564 Additions 26,847 1,726 28,573 Disposals for the period (350) (566) (916) Closing cost amount at 31 December 2022 41,430 9,791 51,221 Opening depreciation and impairment at 1 January 2022 7,145 5,295 12,440 Disposals for the period (210) (547) (757) Depreciation for the period 2,494 1,875 4,369 Closing depreciation and impairment at 31 December 2022 9,429 6,623 16,052 Closing carrying amount at 31 December 2022 32,001 3,168 35,169 At A Glance Our business Perfomance Highlights ESG Corporate governance Financial statements ESG Statements TCM Group Annual report 2023 57 Notes to the consolidated financial statements (continued) 14. Leases (continued) Lease receivables Subleases are speciﬁed as follows: 2023 2022 Undiscounted Undiscounted DKK’000 Book value value Book value value Falling due for payment within one year 8,488 8,727 8,312 8,521 Falling due for payment within one and two years 5,205 5,289 5,173 5,314 Falling due for payment within two and three years 5,257 5,289 5,332 5,420 Falling due for payment within three and four years 376 378 5,495 5,528 Falling due for payment within four and ﬁve years 0 0 396 397 Falling due for payment later 0 0 0 0 Total 19,326 19,683 24,708 25,180 Subleases falling due for payment later than one year is presented as ﬁnancial assets. Subleases falling due for payment within one year are presented as current receivables, but are not included in the calculation of net working capital. Lease liabilities DKK’000 2023 2022 Opening balance, 1 January 60,786 26,411 Non-cash change Acquisition of operations 8,383 0 New lease liabilities 3,393 28,573 Terminated leases 0 (158) Subleases settled directly from the franchisee (5,380) 10,028 6,396 38,443 Financing cash ﬂows Repayment of loans (4,835) (4,068) (4,835) (4,068) Closing balance, 31 December 62,347 60,786 In 2023, the total amount of cash ﬂows related to lease liabilities was DKK -6.7 million (DKK -4.4 million in 2022), of which the interest payments related to the recognized lease liabilities were DKK 1.9 million (DKK 0.3 million) and repayments DKK 4.8 million (DKK 4.1 million). At A Glance Our business Perfomance Highlights ESG Corporate governance Financial statements ESG Statements TCM Group Annual report 2023 58 Notes to the consolidated financial statements (continued) 14. Leases (continued) 15. Investments in associated companies DKK’000 2023 2022 Cost at start of year 61,178 61,178 Additions 153 0 Divestment (61) 0 Carrying amount at end of year 61,270 61,178 Value adjustments at start of year (12,477) (13,740) Impairment (153) 0 Dividend received (2,250) 0 Share of proﬁt/(loss) 1,543 0 Divestment 61 1,263 Value adjustments at end of year (13,276) (12,477) Carrying amount as at end of year 47,994 48,702 DKK’000 2023 2022 Maturity of contractual cash ﬂow 0-6 months 8,413 6,354 6-12 months 8,368 6,209 1-5 years 34,408 28,757 5 years or later 23,261 22,087 74,450 63,407 DKK’000 2023 2022 Amounts recognized in the income statement Cost of short term leases 1,322 1,256 Variable leasing costs that are not included in leasing liabilities 138 138 1,460 1,394 The associated company Celebert ApS sells kitchens online and has balance sheet date as at 30th of June. As of 30 June 2023 Celebert ApS had a gross proﬁt of DKK 12 million and a net proﬁt of DKK 2 million. As of 30 June 2023 assets in Celebert ApS amounted to DKK 39 million of which DKK 10 million was current assets. As of 30 June 2023 short-term liabilities amounted to DKK 5 million. At the end of 2023, recognized goodwill related to associated companies amounted to DKK 45.7 million (DKK 45.7 mil- lion). No impairment was charged to goodwill related to associated companies in 2023 and 2022. The associated company Svane Alnabru AS operates the Svane Køkkenet Alnabru store in Oslo, Norway. As of 31 december 2023 Svane Alnabru AS had a gross proﬁt on DKK 4 million and a net loss of DKK 2 million. As of 31 December 2023 assets in Svane Alnabru AS amounted to DKK 5 million of which DKK 2 million was current assets. As of 31 December 2023 short-term liabilities amounted to DKK 4 million. Due to the ﬁnancial situation of Svane Alnabru as of 3 July 2023 the investment was fully impaired, leading to an impairment charge of DKK 0.2 million. In the same time identiﬁed goodwill DKK 3.5 million was impaired cf. note 12. TCM Group leases varius assets such as production buildings, warehouses, oﬃce buildings, store buildings, company cars etc. The portfolio of lease commitments for short-term leases, at the end of the year, is similar to the portfolio of short- term leases that have been expensed during the period. TCM Group has not entered into any signiﬁcant leases, not yet commenced, to which TCM Group is committed (DKK 10.9 million in 2022). At A Glance Our business Perfomance Highlights ESG Corporate governance Financial statements ESG Statements TCM Group Annual report 2023 59 Notes to the consolidated financial statements (continued) 16. Other financial assets DKK’000 2023 2022 Other ﬁnancial assets Receivables falling due in 12 month or later 9,714 9,450 Deposits 1,310 970 Total 11,024 10,420 19. Share capital No. of No. of registered shares Nominal Share capital shares outstanding value As of 1 January 2023 9,142,294 9,142,294 914,229 Rights issue 1,371,344 1,371,344 137,135 As of 31 December 2023 10,513,638 10,513,638 1,051,364 As of 1 January 2022 10,000,000 10,000,000 1,000,000 Reduction of share capital (857,706) (857,706) (85,771) As of 31 December 2022 9,142,294 9,142,294 914,229 Share capital amounted to nominal DKK 1,051,364. The share’s nominal value is DKK 0,1. All of the registered shares are fully paid. All shares are ordinary shares of the same type. 17. Inventories DKK’000 2023 2022 Raw materials and consumables 51,830 41,075 Semi-ﬁnished products 35,508 29,647 Finished products 10,334 11,180 Total write-down of inventories (5,135) (1,200) 92,537 80,702 Costs of goods sold recognized as an expense during the period are DKK 893.0 million (DKK 915.4 million) and write downs of inventory recognized as an expence during the period are DKK 2.6 million (DKK 0.0 million). Purchares Treasury shares No. of shares Nominel value price % of shares As of 1 January 2023 75,000 7,500 12,087 0.8 As of 31 December 2023 75,000 7,500 12,087 0.7 As of 1 January 2022 832,227 83,223 135,976 8.3 Purchase of treasury shares 100,479 10,048 14,368 1.0 Reduction of share capital (857,706) (85,771) (138,257) (8.6) As of 31 December 2022 75,000 7,500 12,087 0.8 18. Prepaid expenses and accrued income DKK’000 2023 2022 Other prepaid expenses 1,180 2,932 Total 1,180 2,932 At A Glance Our business Perfomance Highlights ESG Corporate governance Financial statements ESG Statements TCM Group Annual report 2023 60 Notes to the consolidated financial statements (continued) 20. Value adjustments of currency hedges Value Value adjustment adjustment of cash flow Total of cash flow Total DKK’000 hedges 2023 2023 hedges 2022 2022 Opening balance (916) (916) (29) (29) Value adjustments of currency hedges before tax (47) (47) (1,137) (1,137) Tax on value adjustments of currency hedges 11 11 250 250 Tax related to prior years 36 36 0 0 Closing balance (916) (916) (916) (916) 21. Earnings per share Earnings per share before dilution Earnings per share before dilution are calculated by dividing proﬁt attributable to the shareholders by the weighted average number of outstanding ordinary shares during the period. 2023 2022 Proﬁt attributable to shareholders (DKK'000) 21,522 70,493 Weighted average number of outstanding ordinary shares before dilution 9,767,408 9,074,847 Earnings per share before dilution (DKK) 2.20 7.77 Earnings per share after dilution To calculate earnings per share after dilution, the weighted average number of outstanding ordinary shares were adjusted for the dilution eﬀect of all potential ordinary shares. These potential ordinary shares were attributable to the Long-term Incentive program (LTI) that were allotted to the Executive Management in 2021, 2022 og 2023. Refer to note 5. If all the performance targets set for the ﬁrst plan, PSU 2021-2023, 2022-2024 og 2023-2025, are fully achieved, the aggregate allocated maximum number of share units and, accordingly, shares to be awarded 65,766 shares (gross earning). 2023 2022 Weighted average number of outstanding ordinary shares 9,767,408 9,074,847 Management performance share scheme 14,578 8,290 Weighted average number of outstanding ordinary shares after dilution 9,781,986 9,083,137 Earnings per share after dilution 2.20 7.76 Hedging reserve The fair value adjustment of unrealized gains/losses of the forward exchange contracts is adjusted in equity. The forward exchange contracts, which have been entered into with the company’s usual bank connection, cover a period 0-12 months from the balance sheet date. 22. Dividend The Board of Directors proposes to the Annual General Meeting that no dividend is distributed for the year 2023. At A Glance Our business Perfomance Highlights ESG Corporate governance Financial statements ESG Statements TCM Group Annual report 2023 61 Notes to the consolidated financial statements (continued) 23. Deferred tax Deferred tax Deferred tax DKK’000 assets liabilities Net Opening balance, 1 January 2023 0 53,393 53,393 Acquisition of operations 0 16,366 16,366 Recognized in net proﬁt for the year 0 (1,727) (1,727) Closing balance, 31 December 2023 0 68,032 68,032 Opening balance, 1 January 2022 0 53,692 53,692 Recognized in net proﬁt for the year 0 (299) (299) Closing balance, 31 December 2023 0 53,393 53,393 The change in deferred tax liabilities for the period: Deferred tax liabilities Temporary Temporary Temporary differences differences differences Temporary Temporary in intangible tangible differences differences morgage DKK’000 assets assets inventory receivables debt Total As of 1 January 2023 39,406 14,467 595 (666) (409) 53,393 Acquisition of operations 12,639 3,352 132 262 (19) 16,366 Recognized in net proﬁt for the year (1,410) 516 (223) (628) 18 (1,727) As of 31 December 2023 50,635 18,335 504 (1,032) (410) 68,032 As of 1 January 2022 39,391 14,315 543 (179) (378) 53,692 Recognized in net proﬁt for the year 15 152 52 (487) (31) (299) As of 31 December 2022 39,406 14,467 595 (666) (409) 53,393 Corporation tax-rate in Denmark for the year is 22.0%. There are no loss carryforwards. 24. Bank loans and mortgage loans DKK’000 2023 2022 Maturity structure Within 1 year 95,511 203,095 Between 1 and 5 years 156,442 11,028 Longer than 5 years 11,631 14,032 Total 263,584 228,156 Refer to note 3 for additional information regarding bank loans and mortgage loans. 25. Financial assets and liabilities 2023 Derivative Financial Financial Hedging assets liabilities instruments measured at measured at Total measured at amortized amortized carrying DKK’000 fair value cost cost amount Other long-term receivables 0 6,861 0 6,861 Trade receivable 0 84,748 0 84,748 Cash and cash equivalents 0 13,285 0 13,285 Total 0 104,894 0 104,894 Long-term interest-bearing liabilities 0 0 200,706 200,706 Current interest-bearing liabilities 0 0 125,226 125,226 Accounts payable 0 0 144,710 144,710 Long-term other liabilities 0 0 52,500 52,500 Short-term current other liabilities 1,220 0 77,161 78,381 Total 1,220 0 600,303 601,523 At A Glance Our business Perfomance Highlights ESG Corporate governance Financial statements ESG Statements TCM Group Annual report 2023 62 Notes to the consolidated financial statements (continued) 25. Financial assets and liabilities (continued) 26. Acquisition of operations (business combinations) 2023: Acquisition of AUBO Production A/S On 3 July 2023, TCM Group A/S acquired 100% of the share capital of AUBO Production A/S. The acquisition supports TCM Group´s strategy of strengthening the market position of TCM in the core markets and grow the presence of TCM in Norway. DKK’000 Purchase consideration Cash paid 105,142 Ordinary shares issued 10,000 Vender note 35,000 Contingent consideration 18,500 Purchase price 168,642 The fair value of the 149,925 shares issued as part of the consideration paid for AUBO Production A/S (DKK 10.0 mil- lion) was DKK 66.7 per share based on the share value calculated as the volume-weighted average closing price as shown by Nasdaq Copenhagen between and including 19 June 2023 and 23 June 2023. Contingent consideration of potential DKK 60 million is linked to the performance of the company going forward. The fair value of the contingent consideration at acquisition was estimated at DKK 18.5 million. 2022 Derivative Financial Financial Hedging assets liabilities instruments measured at measured at Total measured at amortized amortized carrying DKK’000 fair value cost cost amount Other long-term receivables 0 10,420 0 10,420 Trade receivable 0 40,984 0 40,984 Cash and cash equivalents 0 4,392 0 4,392 Total 0 55,796 0 55,796 Long-term interest-bearing liabilities 0 0 73,873 73,873 Current interest-bearing liabilities 0 0 215,068 215,068 Accounts payable 0 0 151,892 151,892 Long-term other liabilities 0 0 587 587 Short-term current other liabilities 1,116 0 50,095 51,211 Total 1,116 0 491,515 492,631 At A Glance Our business Perfomance Highlights ESG Corporate governance Financial statements ESG Statements TCM Group Annual report 2023 63 Notes to the consolidated financial statements (continued) 26. Acquisition of operations (business combinations) (continued) If the acquisition had occurred on 1 January 2023, consolidated pro-forma revenue and proﬁt for the period ended 31 December 2023 would have been approximately DKK 260 million and DKK 6 million respectively. These amounts have been calculated using the subsidiary’s results and adjusting them for: • diﬀerences in the accounting policies between the group and the subsidiary, and • the additional depreciation and amortisation that would have been charged assuming the fair value adjustments to property, plant and equipment and intangible assets had applied from 1 January 2023, together with the conse- quential tax eﬀects. Fair value of trade receivable amounts to DKK 57.3 million. The gross contractual receivables amount to DKK 57.3 mil- lion of which DKK 0.0 million is considered uncollectible. Acquired carrying DKK’000 Fair value amount Assets and liabilities included in the acquisition Cash and cash equivalents 4,351 4,351 Tangible assets 55,370 46,987 Intangible assets 3,383 3,383 Intangible assets: Customer contract 47,500 0 Intangible assets: Brand value 7,500 0 Financial assets 1,062 1,062 Inventories 34,865 34,265 Trade receivable and other receivables 65,164 65,164 Accounts payable and other operating liabilities (42,061) (42,061) Tax payable (9,101) (9,101) Debt to parent company (16,843) (16,843) Other interest-bearing liabilities (8,383) 0 Deferred taxes, net (16,367) (4,135) Net identiﬁable assets acquired 126,440 83,072 Goodwill 42,202 Net assets acquired 168,642 Goodwill is attributable to the workforce and the high proﬁtability of the acquired business. It will not be deductible for tax purposes. Revenue attributable to AUBO Production A/S since the date of acquisition amounts to DKK 117.0 million and net proﬁt amounts to DKK 1.5 million. DKK’000 Purchase consideration – cash outflow Purchase consideration paid in cash 105,142 Cash and cash equivalents in acquired subsidiaries (4,351) Reduction in the Group’s cash and cash equivalents in conjunction with acquisition 100,791 Transaction costs for the acquisition amounted to DKK 2.8 million and are presented under non-recurring items. Of the transaction costs DKK 2.8 million was recognized in Q2 2023. 2022: Acquisition of operations There were no acquisitions in the year ending 31 December 2022. At A Glance Our business Perfomance Highlights ESG Corporate governance Financial statements ESG Statements TCM Group Annual report 2023 64 Notes to the consolidated financial statements (continued) 27. Acquisition of operations (associated companies) 2023: Acquisition of Svane Alnabru AS On 3 July 2023, TCM Group acquired 100% of the shares in Svane Alnabru AS. The company operates the strategicially important Svane Køkkenet Alnabru store Oslo, Norway. The purchase price amounted to DKK 0.2 million. Goodwill identiﬁed upon acquisition DKK 3.4 million was fully impaired as of the acquisition date due to the historic ﬁnancial performance of the company. On 1 September 2023 TCM Group sold 40% of the shares in Svane Alnabru AS for an amount of DKK 0.9 million. 2022: Acquisition of 45% af Celebert ApS On 6 July 2021, TCM Group entered into a strategic partnership with, and acquired stake in the fast growing Danish e-commerce kitchn business Celebert. TCM Group merged its e-commerce activities in kitchn.dk with the activities of Celebert and has initially acquired a 45% stake in Celebert. Final settlement of earn out amounted to DKK 2.2 million in 2022. 28. Changes in liabilities attributable to the financing activities Mortgage Bank DKK’000 loans loans Total Opening balance, 1 January 2023 27,825 200,329 228,154 Financing cash ﬂows Proceeds from loans 0 149,625 149,625 Repayment of loans (2,571) 0 (2,571) Changes in cash pool 0 (111,626) (111,626) (2,571) 37,999 35,428 Closing balance, 31 December 2023 25,255 238,328 263,582 Mortgage Bank DKK’000 loans loans Total Opening balance, 1 January 202 30,629 160,701 191,330 Financing cash ﬂows Repayment of loans (2,805) 0 (2,805) Changes in cash pool 0 39,628 39,628 (2,805) 39,628 36,823 Closing balance, 31 December 2022 27,825 200,329 228,153 At A Glance Our business Perfomance Highlights ESG Corporate governance Financial statements ESG Statements TCM Group Annual report 2023 65 Notes to the consolidated financial statements (continued) 29. Pledged assets, contingent liabilities and commitments 31. Events after the balance sheet date No subsequent events have occurred that materially aﬀect TCM Group’s ﬁnancial position. The Group has, in respect of the it’s commitment to Nykredit, issued a pledge ban on the Group’ assets. The Group has, in respect of it’s ﬁnancing agreements with Nykredit, provided a pledge over company assets of DKK 75 million with charge over goodwill, tangible assets (excluding land and buildings), inventories and trade receivables. The carrying amount of the pledged assets as of 31 December 2023 is DKK 304.3 million. For collateral for debt to mortgage lender, DKK 25.3 million (DKK 27.8 million), pledges have been provided in land and buildings with a carrying amount as of 31 December 2023 amounting to DKK 96.7 million (DKK 95.1 million). Guarantees related to AB92 - provisions of work and supplies within building and engineering – amount to a total of DKK 1.0 million (DKK 1.4 million). The Group has contingent liabilities pertaining to sub-contractor guarantees that arise in normal commercial opera- tions. No signiﬁcant liabilities are expected to arise through these contingent liabilities. Other bank guarantees amount in total to DKK 0.3 million (DKK 0.3 million). The Group has given a Garentee of maximum 12 months rent to a third party, corresponding to DKK 2.2 million. 32. Companies in the TCM Group Business Share of registration no Domicile equity Parant company TCM Group A/S 37291269 Holstebro Subsidiaries TCM Operations A/S 75924712 Holstebro 100% AUBO Production A/S 28854846 Aulum 100% Associated companies Celebert ApS 27428959 Aalborg 45% Svane Alnabru AS 916636849 Oslo, Norway 60%* * Due to speciﬁc conditions in the agreement with the minority shareholder, Svane Alnabru AS is considered an asso- ciated company despite TCM Group A/S owning 60% of the shares in the Company. 30. Related party transactions Related parties with a controlling interest As at 31 December 2023, there are no related parties with a controlling interest in the Company. Transactions between related parties During the ﬁnancial period, the Group has had the following transactions with related parties: Referring to note 5: Remuneration to Executive Management and Board of Directors. The Group has had transactions with the associated company Celebert ApS. Trancactions related to sales amounted to DKK 27.3 million (DKK 20.2 million) and transactions related to administration fees amounted to DKK 0.2 million (DKK 0.2 million). The Group has had transactions with the associated company Svane Alnabru AS. Trancactions related to sales amounted to DKK 2.2 million. There are no other transactions with related parties. At A Glance Our business Perfomance Highlights ESG Corporate governance Financial statements ESG Statements TCM Group Annual report 2023 66 Definitions Key figures Key ﬁgures and ﬁnancial ratios have been deﬁned and calculated as stated below: Following key ﬁgures are not directly derived from the face of the income statement or balance sheet and as such are deﬁned as follows: Adjusted EBITDA: Operating proﬁt before non-recurring items (Adjusted EBIT) plus depreciation and amortization. Adjusted EBIT: Operating proﬁt before non-recurring items (Adjusted EBIT). Net interest-bearing debt: Current and non-current interest-bearing loans and borrowings less interest-bearing receivables and cash and cash equivalents. Net working capital: The sum of inventories, trade receivables, other receivables (excluding subleases) and prepayments less the sum of prepayments from costumers, trade payables and other liabilities. Ratios: Ratio Calculation formula Gross margin Gross proﬁt * 100 Revenue EBITDA margin EBITDA * 100 Revenue Adjusted EBITDA margin Adjusted EBITDA * 100 Revenue Adjusted EBIT margin Adjusted EBIT * 100 Revenue EBIT margin EBIT * 100 Revenue Solvency ratio Equity * 100 Balance sheet total Leverage ratio Net interest-bearing debt excluding tax liabilities 12 months adjusted EBITDA NWC ratio Net working capital (1) * 100 12 months revenue Capex ratio excl. acquisitions Capex ratio excluding acquisitions is calculated as investments in tangible assets (capex) divided with revenue. Capex is exclusive investments in connection with acquisitions. Cash conversion ratio Cash conversion ratio is calculated as adjusted EBITDA less the change in net working capital (1) and capex excluding acquisitions divided by adjusted EBITDA. The ratio is for the last twelve months. The deﬁnition and calculation formula for earnings per share before and after dilution can be found in note 21 in the consolidated ﬁnancial statements. (1) Net working capital is adjusted with assets and liabilities held for sale. At A Glance Our business Perfomance Highlights ESG Corporate governance Financial statements ESG Statements TCM Group Annual report 2023 67 Financial statements of the parent company 68 Statement of comprehensive income 68 Balance sheet as of 31 December 69 Changes in shareholders’ equity 70 Cash ﬂow statement 70 Notes to the parent ﬁnancial statements At A Glance Our business Perfomance Highlights ESG Corporate governance Financial statements ESG Statements TCM Group Annual report 2023 68 Statement of comprehensive income Balance sheet as of 31 December DKK’000 Note 2023 2022 DKK’000 Assets Note 2023 2022 Revenue 10,575 7,296 7,296 Gross proﬁt 10,575 Non-current assets Administrative expenses Other operating income Operating loss before non-recurring items Non-recurring items Operating loss 2,3 (14,407) 1,000 (10,080) 0 Investments in subsidiaries Financial non-current assets Total non-current assets 7 665,399 665,399 665,399 496,756 496,756 496,756 (2,832) (2,800) (5,632) (2,784) (1,099) (3,883) 4 Current assets Receivables from subsidiaries 159,823 138 111,641 80 Dividend from subsidiaries Financial income 50,000 9,200 115,000 2,283 Other receivables 5 5 Deferred tax assets 185 66 Financial expenses Proﬁt before tax (16,554) 37,014 (6,332) 107,068 Tax receivables 0 0 Prepaid expenses and accrued income Total current assets 13 1,556 113,343 160,159 Tax for the year 6 2,448 1,742 Net proﬁt for the year 39,463 108,810 Cash and cash equivalents Total current assets Total assets 0 160,159 825,558 0 113,343 610,099 Other comprehensive income Items that may be reclassiﬁed subsequently to proﬁt or loss Value adjustments of cash-ﬂow hedges before tax Tax on value adjustments of cash-ﬂow hedges Other comprehensive income for the year Total comprehensive income 0 0 0 0 0 0 39,463 108,810 At A Glance Our business Perfomance Highlights ESG Corporate governance Financial statements ESG Statements TCM Group Annual report 2023 69 Balance sheet as of 31 December (continued) Changes in shareholders’ equity Share capital Treasury shares Retained earnings proposed dividend DKK’000 Total DKK’000 Note 2023 2022 Opening balance 01.01.2023 914 (12,087) 415,164 0 403,991 Equity and liabilities Net proﬁt for the year 0 0 39,463 0 39,463 Share capital 1,051 (12,087) 541,991 0 914 (12,089) 415,164 0 Total comprehensive income for the year 0 0 0 39,463 471 0 0 0 0 0 39,463 471 Treasury shares Share based incentive program Rights issue 0 Retained earnings Proposed dividend for the ﬁnancial year Total equity 137 0 0 0 88,644 (1,751) 541,991 88,781 (1,751) 530,955 Cost related to rights issue Closing balance 31.12.2023 530,955 403,989 1,051 (12,087) Bank loans 8 8 145,346 52,500 0 587 587 Opening balance 01.01.2022 1,000 (135,976) 444,421 54,404 363,849 Other payables Net proﬁt for the year 108,810 0 108,810 Total long-term liabilities 197,846 Total comprehensive income for the year 0 0 0 0 108,810 0 0 108,810 (54,404) 104 Current liabilities Bank loans Dividend paid (54,404) 92,982 1,044 0 200,329 1,734 0 Share based incentive program Purchase of treasury shares Reduction of share capital Closing balance 31.12.2022 0 0 104 0 0 0 0 Trade payables 0 (14,368) 138,257 (12,087) 0 (14,368) 0 Payables to subsidiaries Current tax liabilities Other payables (86) 914 (138,171) 415,164 104 3,460 0 403,991 2,627 96,757 294,603 Total current liabilities Total liabilities 205,523 206,110 Total equity and liabilities 825,558 610,099 At A Glance Our business Perfomance Highlights ESG Corporate governance Financial statements ESG Statements TCM Group Annual report 2023 70 Cash flow statement Notes to the parent financial statements 1. Significant accounting estimates and judgements DKK’000 NOTE 2023 2022 Determining the carrying amount of certain assets and liabilities requires an estimate of how future events will aﬀect the value of those assets and liabilities at the balance sheet date. Estimates that are signiﬁcant to the Parent’s ﬁnancial reporting are made, for instance, related to valuation of investments in subsidiaries, which constitute a major share of the Parent’s total assets. Operating activities Operating loss (5,632) (3,883) 0 Investments in subsidiaries are tested for impairment if events or other circumstances indicate that the carrying amount is not recoverable. Measuring investments in subsidiaries requires signiﬁcant estimates to be made when making diﬀerent assumptions, including expected future cash ﬂows, discount rate and terminal value growth rates. The sensitivity to changes in the assumptions applied collectively and individually – may be signiﬁcant. Other non-cash operating items Income tax paid 471 (10,656) (37,171) 455 (15,326) (59,144) (3,464) (81,817) Change in operating receivables Change in operating liabilities Cash ﬂow from operating activities (52,533) Investments in subsidiaries Dividend received (105,143) 50,000 0 115,000 115,000 Cash ﬂow from investing activities (55,143) Interest paid (16,554) 9,200 37,999 0 (6,332) 2,283 Interest recieved Proceeds and repayment of loans Purchase of treasury shares Rights issue, net proceeds Dividend paid 8 39,628 (14,370) 0 77,031 0 (54,404) (33,195) Cash ﬂow from ﬁnancing activities 107,676 Cash ﬂow for the year 0 (12) Cash at start of year Cash ﬂow for the year Cash at end of year 0 0 0 12 (12) 0 At A Glance Our business Perfomance Highlights ESG Corporate governance Financial statements ESG Statements TCM Group Annual report 2023 71 Notes to the parent financial statements (continued) 2. STaff Costs 3. Audit fee DKK’000 2023 2022 In addition to statutory audit, PricewaterhouseCoopers Statsautoriseret Revisionspartnerselskab, the auditors appointed at the Annual General Meeting, provides other assurance engagements and other services to the Group. Total costs for employee benefits DKK’000 2023 2022 Salaries and other remuneration 9,055 12 6,505 1 Specification by type of costs Statutory audit Social security costs 788 36 255 0 Pension costs – deﬁned contribution plans Total costs for employees 447 399 6,905 Other assurance engagements Tax and indirect taxes advisory Other services 9,514 157 0 Further employee beneﬁts for executive management a.o. company car, phone etc. are presented as administration 659 0 costs. 1,640 255 The fee for non-audit services delivered by PricewaterhouseCoopers Statsautoriseret Revisionspartnerselskab to the Remuneration and other benefits Company amounted to DKK 0.9 million in 2023 and consisted of various services, including due diligence in connection with the AUBO Production A/S acquisition. In 2022, the fee for non-audit services delivered by PricewaterhouseCoop- ers Statsautoriseret Revisionspartnerselskab to the Company amounted to DKK 0.0 million. Variable re- Variable re- BasE salary, muneration, muneration, Directors cash based share based Other benefits Pension costs Number of Total individuals 4. Non-recurring items DKK’000 2023 fees (STI) (LTI) DKK’000 2023 2022 Board of Directors Transaction costs related to business combinations 2,800 0 0 2,625 0 0 0 0 2,625 7 Restructuring 1,099 Executive Management Total 2,800 1,099 4,561 1,000 425 398 447 6,831 2 Total 7,186 1,000 425 398 447 9,456 9 Below is how the income statement (extract) would have been presented if there were not adjusted for non-recurring items: DKK’000 2023 2022 2022 Board of Directors Revenue 10,575 10,575 (17,207) 1,000 7,296 7,296 (11,179) 0 2,375 0 0 0 0 2,375 6 Gross proﬁt Executive Management Administrative expenses Other operating income Operating proﬁt 4,642 317 48 648 398 6,053 2 Total 7,016 317 48 682 398 8,428 8 (5,632) (3,883) Refering to note 5 of the consolidated ﬁnancial statement for description of the Short-term Incentive program (STI) and Long-term Incentive program (LTI). TCM Group presents non-recurring items separately to ensure comparability. Non-recurring items consist of income and expenses that are special and of a non-recurring nature. For 2023 non-recurring items consist of transaction costs related to business combinations. At A Glance Our business Perfomance Highlights ESG Corporate governance Financial statements ESG Statements TCM Group Annual report 2023 72 Notes to the parent financial statements (continued) 5. Financial income and expenses 7. Investments in subsidiaries DKK’000 2023 2022 DKK’000 2023 2022 Financial income Investments in subsidiaries Cost at start of year Interest income from subsidiaries 9,200 2,283 496,756 168,643 665,399 665,399 496,756 0 Acquisition during the year Cost at end of year Financial expenses 496,756 496,756 Interest expense on liabilities measured at amortized costs (16,554) (6,332) Carrying amount at end of year Total (7,354) (4,049) Investments in subsidiaries comprise: TCM Operations A/S, 100% 6. Corporation tax AUBO Production A/S, 100% Other comprehen- sive income Total comprehen- sive income Income statement Refer to note 26 of the consolidated ﬁnancial statements for the details of the acquisition of AUBO Production A/S. DKK’000 Refer to note 32 of the consolidated ﬁnancial statements for a list of all companies in the TCM Group. Tax for the year can be speciﬁed as follows: The carrying amount of the Parent’s investments in subsidiaries is tested for impairment if an indication of impair- ment exists. There has not been identiﬁed any indication of impairment. Current tax 2,329 119 0 0 0 2,329 119 Change in deferred tax during the year Total 2,448 2,448 Tax for the previus year can be speciﬁed as follows: Current tax 1,742 0 1,742 Total 1,742 0 1,742 Reconciliation of the eﬀective tax rate for the year can be speciﬁed as follows: DKK’000 % 2023 % 2022 Tax rate 22.0 (30.3) 1.7 8,143 (11,220) 629 22.0 (23.6) 0.0 23,555 (25,300) 4 Non-taxable income Non-deductible expenses Eﬀective tax rate for the year (6.6) (2,448) (1.6) (1,741) Non-taxable income relates primarily to dividend from subsidiaries. At A Glance Our business Perfomance Highlights ESG Corporate governance Financial statements ESG Statements TCM Group Annual report 2023 73 Notes to the parent financial statements (continued) 8. Changes in liabilities attributable to the financing activities 9. Guarantees, contingent liabilities and collateral The Company has, in respect of the Group’s commitment to Nykredit, issued a pledge ban on all assets. DKK’000 Bank loans Total TCM Group A/S is the management company in the Danish joint taxation. Consequently, refering to the Danish Corpo- ration Tax Act regulations, TCM Group A/S is, with eﬀect from the ﬁnancial year 2016, liable for any income taxes, etc. for the jointly taxed companies, and TCM Group A/S is likewise liable for any obligations to withhold tax at source on interests, royalities and returns for the jointly taxed companies. Opening balance, 1 January 2022 Financing cash ﬂows 200,329 200,329 Proceeds from loans 149,625 (111,626) 37,999 149,625 (111,626) 37,999 Changes in cash pool 10. Related parties For speciﬁcation of related parties refer to note 30 and 32 of the consolidated ﬁnancial statements. Closing balance, 31 December 2022 238,328 238,328 Referring to note 5 of the consolidated ﬁnancial statements: Remuneration to Executive Management and Board of Directors. Opening balance, 1 January 2021 Financing cash ﬂows 160,701 160,701 Management fee from subsidiaries in the ﬁnancial year amounts to DKK 10.6 million (DKK 7.3 million). Changes in cash pool 39,628 39,628 Intragroup transactions are carried out on arm’s length principles. 39,628 39,628 Aside from this, no transactions with the Executive Management or major shareholders or other related parties have been made during the year. Closing balance, 31 December 2021 200,329 200,329 11. Events after the balance sheet date No subsequent events have occurred that materially aﬀect TCM Group’s ﬁnancial position. At A Glance Our business Perfomance Highlights ESG Corporate governance Financial statements ESG Statements TCM Group Annual report 2023 74 Notes to the parent financial statements (continued) 12. Accounting policies 13. Financial risks These parent ﬁnancial statements are prepared under the historical cost convention and presented in accord- ance with International Financial Reporting Standards as adopted by the EU and additional requirements of the Danish Financial Statements Act. Translation exposure Interest-rate risk The Company does not have any subsidiaries in foreign countries, hence there is no translation exposure. It is group policy to fully or partially hedge interest rate risks on loans when it is assessed that the debt is mate- rial. The group manages interest rate risk by maintain- ing an appropriate mix between ﬁxed and ﬂoating rate borrowings, and by use of interest rate swap contracts. Credit risk The Company does not have any external activities. No material credit risk have been identiﬁed. The Company has recievables from its subsidiaries as result of inter- company ﬁnancing. No signiﬁcant risk has been identi- ﬁed on these recievables. Description of accounting policies applied Compared with the accounting policies described for the consolidated ﬁnancial statements (see note 1 to the con- solidated ﬁnancial statements), the accounting policies applied by the Parent are diﬀerent in the following: The interest rates on the Nykredit facilities are currently variable. For the Company’s ﬂoating rate cash and cash equiva- lents and debt to banks, an increase in interest rate level of 1% p.a. relative to the actual interest rates would have a negative impact on the proﬁt for the year and on equity at 31 December 2023 of DKK 2.7 million (DKK 2.0 million). Financial exposure Dividend income The Group in 2022 entered into a facility agreement with Nykredit Bank comprising a committed facility of DKK 200 million. The agreement initially included a 3-year commitment plus an option to extend the facility with two 1-year options on similar terms, of which the Group in 2023 exercised the ﬁrst 1-year option. In connection with the acquisition of AUBO Production A/S the facility was increased to by DKK 20 million to DKK 220 million. In addition, the Group in March 2023 entered into a one year un-committed facilty agreement with Nykredit Bank of DKK 100 million. After the balance sheet date the one year un-committed facility has been renewed to March 2025 as a DKK 50 million facility. Distribution of proﬁts accumulated by subsidiaries is taken to income in the Parent’s income statement in the ﬁnancial year in which the dividend is received. If an amount is distributed exceeding the subsidiary’s com- prehensive income for the year, then an impairment test is performed. Assumptions for analysis of interest-rate sensitivity The stated sensitivities are calculated on the basis of the recognized ﬁnancial assets and liabilities at 31 December 2023. No adjustments have been made for instalments, raising of loans, etc. during the course of the year. Investments in subsidiaries Investments in subsidiaries are measured at cost in the parent ﬁnancial statements. If an indication of impair- ment exists, then an impairment test is performed as described in the accounting policies for the consolidated ﬁnancial statements. If the carrying amount exceeds the recoverable amount, investments are written down to such lower amount. The computed expected ﬂuctuations are based on the current market situation and expectations for the mar- ket developments in the interest rate level In connection with the acquisition of AUBO Production A/S, the Group entered into a 3-year committed facility agreement with Nykredit Bank of DKK 150 million. The facility agreement includes two 1-year extension options on similar terms. Capital management The Board of Directors has adopted a dividend policy with a target payout ratio of 40-60 percent of consoli- dated net proﬁt for the year The facility agreements with Nykredit Bank contains a leverage covenant of 5.0 until 30 June 2024 and 4.5 until 31 December 2024. There has been no breach of any cov- enant during the period. Liquidity risks Liquidity is controlled centrally with the aim of using available liquidity eﬃciently, at the same time keeping necessary reserves are available. Available liquidity comprised DKK 234 million (DKK 100 million) as of 31 December 2023. At A Glance Our business Perfomance Highlights ESG Corporate governance Financial statements ESG Statements TCM Group Annual report 2023 75 Statement by Management on the annual report Independent auditor's reports The Board of Directors and the Executive Management have today considered and adopted the annual report for the ﬁnancial year 1 January 2023 – 31 December 2023. The Consolidated Financial Statements and the Parent Company Financial Statements are prepared in accordance with International Financial Reporting Standards as adopted by the EU and additional requirements of the Danish Financial Statements Act. To the shareholders of TCM Group A/S Report on the audit of the Financial Statements In our opinion, the Consolidated Financial Statements and the Parent Company Financial statements give a true and fair view of the Group’s and the Parent Company Financial position at 31 December 2023 as well as of the results of their operations and the cash ﬂows for the period 1 January 2023 – 31 December 2023. Our opinion In our opinion, the Consolidated Financial Statements and the Parent Company Financial Statements give a true and fair view of the Group’s and the Parent Company’s ﬁnancial position at 31 December 2023 and of the results of the Group’s and the Parent Company’s operations and cash ﬂows for the ﬁnancial year 1 January to 31 December 2023 in accordance with IFRS Accounting Standards as adopted by the EU and further requirements in the Danish Financial Statements Act. In our opinion, Management’s Review includes a true and fair account of the development in the operations and ﬁnan- cial circumstances of the Group and the Parent Company, of the results for the year and of the ﬁnancial position of the Group and the Parent Company as well as a description of the most signiﬁcant risks and elements of uncertainty facing the Group and the Parent Company. Our opinion is consistent with our Auditor’s Long-form Report to the Audit Committee and the Board of Directors. In our opinion, the annual report of TCM Group A/S for the ﬁnancial year 1 January to 31 December 2023 with the ﬁle name tcm-group-2023-12-31-en.zip is prepared, in all material respects, in compliance with the ESEF Regulation. We recommend that the Annual Report be adopted at the Annual General Meeting. What we have audited The Consolidated Financial Statements and Parent Company Financial Statements of TCM Group A/S for the ﬁnancial year 1 January to 31 December 2023, pp. 38-66 and 68-74, comprise income statement and statement of comprehensive income, balance sheet, statement of changes in shareholders’ equity, cash ﬂow statement and notes, including mate- rial accounting policy information for the Group as well as for the Parent Company. Collectively referred to as the “Financial Statements”. Holstebro, 28 February 2024 Executive Management Basis for opinion We conducted our audit in accordance with International Standards on Auditing (ISAs) and the additional require- ments applicable in Denmark. Our responsibilities under those standards and requirements are further described in the Auditor’s responsibilities for the audit of the Financial Statements section of our report. Torben Paulin Thomas Hjannung Chief Executive Oﬃcer Chief Financial Oﬃcer We believe that the audit evidence we have obtained is suﬃcient and appropriate to provide a basis for our opinion. Independence Board of Directors We are independent of the Group in accordance with the International Ethics Standards Board for Accountants’ Inter- national Code of Ethics for Professional Accountants (IESBA Code) and the additional ethical requirements applicable in Denmark. We have also fulﬁlled our other ethical responsibilities in accordance with these requirements and the IESBA Code. Sanna Mari Suvanto-Harsaae Anders Tormod Skole-Sørensen Carsten Bjerg Chairman Deputy Chairman To the best of our knowledge and belief, prohibited non-audit services referred to in Article 5(1) of Regulation (EU) No 537/2014 were not provided. Appointment Søren Mygind Eskildsen Erika Hummel Jan Amtoft Pernille Wendel Mehl We were ﬁrst appointed auditors of TCM Group A/S on 5 April 2022 for the ﬁnancial year 2022. We have been reappointed annually by shareholder resolution for a total period of uninterrupted engagement of 2 years including the ﬁnancial year 2023. At A Glance Our business Perfomance Highlights ESG Corporate governance Financial statements ESG Statements TCM Group Annual report 2023 76 Independent auditor’s reports (continued) Key audit matters Key audit matters are those matters that, in our professional judgement, were of most signiﬁcance in our audit of the Financial Statements for 2023. These matters were addressed in the context of our audit of the Financial Statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Key audit matter How our audit addressed the key audit matter Impairment test of goodwill and brand We considered the appropriateness of the accounting policies for assessing the recoverability of the carrying amount of goodwill and brand. At 31 December 2023 the Group’s intangible assets amount to DKK 672,322 thousand primarily related to goodwill of DKK 411,998 thousand and brand of DKK 178,711 thousand. Key audit matter How our audit addressed the key audit matter Our audit procedures included assessment of the applied impairment model with focus on signiﬁcant assumptions in determination of future cash ﬂows, including growth rates for revenue, proﬁt margins and investments in the budget and forecast periods, as well as discount rate and royalty rate used. Aubo Production A/S opening balance and PPA adjustments Our audit procedures included assessing the appropriateness of the accounting policies for business combinations applied by Management and assessing compliance with applicable ﬁnancial reporting standards. Impairment tests related to goodwill and brand include signiﬁcant judgement and estimation by management, including determination of future growth rates for revenue, proﬁt margins and investments in the budget and forecast periods, as well as discount rate and royalty rate. Aubo Production A/S was acquired with accounting eﬀect as at 3 July 2023. When acquiring Aubo Production A/S, TCM Group A/S prepared a purchase price allocation (’PPA’) for the acquisition, resulting in assets and liabilities being separately recognised and valued in the opening balance. We assessed sensitivity analysis performed by management to evaluate the impact of reasonable changes in key assumptions. We involved our internal specialists in assessing the valuation methodologies and WACC used by management and the valuation of the acquired assets and liabilities. We focused on impairment tests related to goodwill and brand as impairment tests are complex and associated with subjectivity in the determination of signiﬁcant assumptions and data used. Further, we evaluated the accuracy in managements’ estimates by comparing the budget for 2023 with actual ﬁgures. In order to determine the fair value of the separately identiﬁed assets and liabilities in a business combination, the valuation methodologies require input based on assumptions about the future and applied discounted cash ﬂow forecasts, including WACC and growth in revenue. The signiﬁcant estimates mainly relate to assessing the fair value of acquired customer contract and brand. We challenged the signiﬁcant assumptions used to determine the fair value of the acquired assets and liabilities in the business combination, including the fair value of acquired customer contract and brand. We refer to note 12 in the consolidated ﬁnancial statements. We also assessed the appropriateness of the disclosures related to impairment tests. Further, we challenged and discussed with management the estimated fair value of the earn- outs being recognised as part of the total purchase price. Statement on Management’s Review Management is responsible for Management’s Review, pp. 4-35 and 79-86. Further, the purchase price consisted of signiﬁcant earn-outs where the amount to be paid to the seller depends on future performance of the acquired business. The earn-outs are measured at fair value which inherently is impacted by a high degree of management estimation. Finally, we assessed the adequacy of disclosures relating to the business combination Our opinion on the Financial Statements does not cover Management’s Review, and we do not express any form of assurance conclusion thereon. We focused on this area because of the signiﬁcance of the amounts in the PPA and because the PPA and fair value of earn-outs require signiﬁcant judgements and estimates by Management. In connection with our audit of the Financial Statements, our responsibility is to read Management’s Review and, in doing so, consider whether Management’s Review is materially inconsistent with the Financial Statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. Reference is made to note 26 in the Consolidated Financial Statements. Moreover, we considered whether Management’s Review includes the disclosures required by the Danish Financial Statements Act. Based on the work we have performed, in our view, Management’s Review is in accordance with the Consolidated Finan- cial Statements and the Parent Company Financial Statements and has been prepared in accordance with the require- ments of the Danish Financial Statements Act. We did not identify any material misstatement in Management’s Review. At A Glance Our business Perfomance Highlights ESG Corporate governance Financial statements ESG Statements TCM Group Annual report 2023 77 Independent auditor’s reports (continued) • Evaluate the overall presentation, structure and content of the Financial Statements, including the disclosures, and whether the Financial Statements represent the underlying transactions and events in a manner that gives a true and fair view. Management’s responsibilities for the Financial Statements • Obtain suﬃcient appropriate audit evidence regarding the ﬁnancial information of the entities or business activi- ties within the Group to express an opinion on the Consolidated Financial Statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. Management is responsible for the preparation of consolidated ﬁnancial statements and parent company ﬁnancial statements that give a true and fair view in accordance with IFRS Accounting Standards as adopted by the EU and fur- ther requirements in the Danish Financial Statements Act, and for such internal control as Management determines is necessary to enable the preparation of ﬁnancial statements that are free from material misstatement, whether due to fraud or error. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and signiﬁcant audit ﬁndings, including any signiﬁcant deﬁciencies in internal control that we identify during our audit. In preparing the Financial Statements, Management is responsible for assessing the Group’s and the Parent Compa- ny’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless Management either intends to liquidate the Group or the Parent Company or to cease operations, or has no realistic alternative but to do so. We also provide those charged with governance with a statement that we have complied with relevant ethical require- ments regarding independence, and to communicate with them all relationships and other matters that may reasona- bly be thought to bear on our independence and, where applicable, actions taken to eliminate threats or safeguards applied. Auditor’s responsibilities for the audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the Financial Statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Rea- sonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs and the additional requirements applicable in Denmark will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to inﬂuence the economic decisions of users taken on the basis of these Financial Statements. From the matters communicated with those charged with governance, we determine those matters that were of most signiﬁcance in the audit of the Financial Statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter. Report on compliance with the ESEF Regulation As part of an audit in accordance with ISAs and the additional requirements applicable in Denmark, we exercise pro- As part of our audit of the Financial Statements we performed procedures to express an opinion on whether the annual report of TCM Group A/S for the ﬁnancial year 1 January to 31 December 2023 with the ﬁlename tcm-group-2023-12- 31-en.zip is prepared, in all material respects, in compliance with the Commission Delegated Regulation (EU) 2019/815 on the European Single Electronic Format (ESEF Regulation) which includes requirements related to the preparation of the annual report in XHTML format and iXBRL tagging of the Consolidated Financial Statements including notes. Management is responsible for preparing an annual report that complies with the ESEF Regulation. This responsibility includes: fessional judgement and maintain professional scepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the Financial Statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is suﬃcient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the eﬀectiveness of the Group’s and the Parent Company’s internal control. • • The preparing of the annual report in XHTML format; The selection and application of appropriate iXBRL tags, including extensions to the ESEF taxonomy and the anchoring thereof to elements in the taxonomy, for all ﬁnancial information required to be tagged using judgement where necessary; • • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by Management. • • Ensuring consistency between iXBRL tagged data and the Consolidated Financial Statements presented in human-readable format; and Conclude on the appropriateness of Management’s use of the going concern basis of accounting and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast signif- icant doubt on the Group’s and the Parent Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the Financial Statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group or the Parent Company to cease to continue as a going concern. For such internal control as Management determines necessary to enable the preparation of an annual report that is compliant with the ESEF Regulation. At A Glance Our business Perfomance Highlights ESG Corporate governance Financial statements ESG Statements TCM Group Annual report 2023 78 Independent auditor’s reports (continued) Our responsibility is to obtain reasonable assurance on whether the annual report is prepared, in all material respects, in compliance with the ESEF Regulation based on the evidence we have obtained, and to issue a report that includes our opinion. The nature, timing and extent of procedures selected depend on the auditor’s judge- ment, including the assessment of the risks of material departures from the requirements set out in the ESEF Regulation, whether due to fraud or error. The procedures include: • • Testing whether the annual report is prepared in XHTML format; Obtaining an understanding of the company’s iXBRL tagging process and of internal control over the tagging process; • • Evaluating the completeness of the iXBRL tagging of the Consolidated Financial Statements including notes; Evaluating the appropriateness of the company’s use of iXBRL elements selected from the ESEF taxonomy and the creation of extension elements where no suitable element in the ESEF taxonomy has been identiﬁed; Evaluating the use of anchoring of extension elements to elements in the ESEF taxonomy; and Reconciling the iXBRL tagged data with the audited Consolidated Financial Statements. • • In our opinion, the annual report of TCM Group A/S for the ﬁnancial year 1 January to 31 December 2023 with the ﬁle name tcm-group-2023-12-31-en.zip is prepared, in all material respects, in compliance with the ESEF Regulation. Aarhus, 28 February 2024 PricewaterhouseCoopers Statsautoriseret Revisionspartnerselskab CVR no 33 77 12 31 Claus Lindholm Jacobsen State Authorised Public Accountant mne23328 Claus Lyngsø Sørensen State Authorised Public Accountant mne34539 At A Glance Our business Perfomance Highlights ESG Corporate governance Financial statements ESG Statements TCM Group Annual report 2023 79 ESG Statements Terna At A Glance Our business Perfomance Highlights ESG Corporate governance Financial statements ESG Statements TCM Group Annual report 2023 80 ESG Statements We continuously seek to improve our data registration, collection, and reporting of relevant ESG indicators, and provide data that can be measured year after year. The ESG data collection and reporting support our business to direct action plans and it provides transparency for all stakeholders in our sustainability work. The following contain our ESG key data within the area Environmental – Social and Governance. 81 Enviromental data 81 Greenhouse gas emissions (CO2e) 82 Renewable electricity 82 Ressources 83 Social data 83 Diversity 84 Occupational health and safety 85 Governance data 85 Composition of the board of directors 85 Risk and regulations 86 Remueration At A Glance Our business Perfomance Highlights ESG Corporate governance Financial statements ESG Statements TCM Group Annual report 2023 81 Environmental data Greenhouse gas emission (CO2E) It is TCM Group’s ambition to achieve net zero direct and indirect emissions from sources owned or controlled by TCM Group (Scope 1 and scope 2). ison with 2022 driven by increased emission from use of vehicles (5.6 %) and natural gas (3.3 %). The increase of CO2 emissions from natural gas is because of higher CO2 emission factor than previous years as a result of a change in underlying mix of gas types. The consumption of natural gas decreased from 2022 to 2023. the scope 2 emission from electricity to 0 in 2023. With district heating going up from 4 tCO2e in 2022 to 16 tCO2e in 2023 the total scope 2 emission is 16 tCO2e in 2023. This is a result of conversion from natural gas to district heating. Accounting practices The CO2 emission is based on the invoiced energy con- sumption per source. The development in CO2 emission in 2023 is driven by two primary factors. The inclusion of AUBO Production A/S to TCM Group and having all electricity consump- tion covered by renewable energy certiﬁcates from wind and solar power. The CO2e factors applied are based on market statistics for Petrol, diesel and LPG gas. CO2 factors for Natural gas, and district heating are based on environmental Scope 3 In 2023 TCM introduced its ﬁrst electric cars in the company ﬂeet we expect to reduce the emission from vehicles going forward. In 2023 TCM Group had the emission reduction target of 42 % reduction by 2030 (from a 2021 baseline) approved by the Science Based Targets initiative. This means going forward we will also start mapping Scope 3 CO2 emission, and we are planning to present our baseline and targets for scope 3 in 2025. declarations from the supplier. Electricity (before 2023) is based on market environmental declarations. Scope 1 The CO2 emission is calculated with reference to GRI 305 Emissions. Scope 1 emissions includes a contribution from AUBO Scope 2 but would also have seen an increase in a direct compar- Transition to renewable energy has eﬀectively reduced The tracking of CO2 emission is aligned with UNGC principles 7,8,9. Reference report page unit 2023 2022 2021 2020 2019 page 22,25 Co2 Emissions CO2e, Scope 1 [ton] -hereof AUBO Vehicles tCO e 1,215 152 237 42.7 989 109 5 1,032 - 1,299 1,435 - 1,427 - 2 tCO e - 2 tC02e tC02e tC02e tC02e tC02e tC02e 184 - 174.5 210 - 165 - -hereof AUBO Natural gas - 836 - 1,077.5 1,191 - 1,207 - -hereof AUBO Others - 12 47 34 - 42 -hereof AUBO CO2, total Scope 2 -hereof AUBO Electric power -hereof AUBO District heating -hereof AUBO CO2, total Scope 1+2 -hereof AUBO CO2e-intensity (revenue) - - 1,041 - - tCO e 16 0 892 - 1,703 - 1,728 - 2 tCO e 2 tC02e tC02e tC02e tC02e 0 888 - 1,035 - 1,698 - 1,723 - 0 16 4 6 5 5 0 - - - - tCO e 1,231 152 1.1 1,924 - 2,340 - 3,138 - 3,155 2 tCO e 2 ratio 1.7 2.1 3.1 3.1 At A Glance Our business Perfomance Highlights ESG Corporate governance Financial statements ESG Statements TCM Group Annual report 2023 82 Environmental Data ENERGY Environmental Data Resources In 2023 we decreased our electricity consumption by 11 % this is despite having included AUBO production to TCM Group accounting for the full year of 2023. Accounting practices Energy consumption is based on invoiced consumption. Waste Water TCM Group continuously seek to increase productivity, reduce waste throughout the production processes, as well as working with waste management and with sup- pliers to reduce waste and improve waste handling. During 2023 we have continued our eﬀorts of sorting waste to retain the highest possible value of the materials. Our water consumption is primarily used for sanitation and heating purposes, and we expect this to be relatively stable. In 2023, water consumption increased by 16 per cent compared to last year. The increase of water is a result of increasing our building mass as well as includ- ing AUBO Production the numbers. Renewable energy share (for 2021, 2022) is based on standard energy market mix in Denmark; (Environmen- tal declaration 2021). Looking at AUBO Production isolated (numbers not shown) the consumption has increased during 2023 as a result of a transition from using natural gas for heating to electric heating pumps. The overall reduction is a result of investments made to improve energy eﬃciency and continuously actively promoting energy awareness. In 2023 all electricity purchased is covered by renewable energy certiﬁcates. Accounting practices Waste volumes and their disposal method is weighed Even with the inclusion of AUBOs waste volumes in the 2023 numbers we have made a reduction in the total volume of waste. While this is most likely aﬀected by a decrease in activity, the distribution of volumes between disposal methods relies entirely on sorting and increase of the part that goes to recycling is a good step towards our target of 99.7 % in 2025. Electricity consumption is calculated as Electricity consumption [kWh]/ net revenue [kDKK] and reported by waste and sorting handling companies The fact that all electricity used during 2023 has been covered by renewable energy certiﬁcates from wind and solar power brings the renewable electricity share to 100%. Reference standard: GRI 306-5 Waste Water consumption cover all water purchased from external suppliers and is based on the invoiced volume. Reference 2021 report page Reference 2021 report page unit 2023 2022 unit 2023 2022 page 25 page 25 Energy Resources Energy consumption MWh % 6,483.4 100 7,294.3 82 8,4908 Water consumption Waste m3 Ton % 6,880.97 4,165.37 94.2 5,899.86 4,409.98 90.3 - Renewable electricity 82 6,184.4 Electricity consumption/revenue Ratio 5.8 6.4 7.7 Recycling 92.1 7.3 0.0 0.6 Energy recovery Landﬁll % 4.1 9.6 % 0.0 0.0 Hazardous waste % 1.0 0.1 At A Glance Our business Perfomance Highlights ESG Corporate governance Financial statements ESG Statements TCM Group Annual report 2023 83 Social data Diversity At TCM Group we are convinced that a diverse and inclusive work environment will beneﬁt society. Our approach is deﬁned in our diversity and inclusion policy. Gender diversity overall has decreased a little, while gender diversity at other management levels has gone up. Gender diversity Seond management level is manage- ment in direct reporting to the executive management. Gender diversity other management levels is the com- plete management group at TCM incl executive mgmt and second management level The current composition reﬂects the traditional gender distribution within manufacturing companies, where there is a predominance of male foremen in production, and at the administrative level, a slight predominance of female employees. At TCM Group it is our policy that equal jobs are rewarded with equal pay. Any diﬀerence in pay is solely based on qualiﬁcations and experience. The gender diversity is measured with reference to GRI 404 Diversity and Equal Opportunity and includes all TCM Group employees. Accounting practices FTE and the shares of respectively blue- and white- collar workers are calculated excluding temporary and short-term employments. Gender diversity measured for other management levels includes executive mgmt. and mgmt. group. The development in 2023 has been very much aﬀected by the inclusion of AUBO Production to TCM Group. With a reduction in employees as a result of capacity adjust- ments and the addition of AUBO Production the total number of employees is slightly higher than 2022. The pay gap between gender is measured white collar employees minus executive management. The number of employees who are respectively on ﬂex job contracts or similar and trainee contracts are counted at the end of the year. Our work with diversity aligns with UNGC principles 3,4,5 and 6. The inclusion of AUBO Production has also introduced a considerable increase in the number of ﬂex jobs as well as trainees or similar positions. This reﬂects the long-term commitment to diversity at AUBO. Gender diversity Executive management is deﬁned as CEO and CFO as they have direct reporting line to the board of directors. Reference report page unit 2023 2022 2021 2020 2019 page 23-24 Diversity Full-time employees, end of the period Blue collar workers #FTE % 415 70% 30% 21 482 77% 23% 5 504 - 483 - 489 - White collar workers % - - - Flex jobs etc. # - - - Trainees, interns, apprentices Gender diversity overall # 12 6 13 16 - 17 - % 34% 36% 32% Gender diversity, 1st level management as per §99b 0 % % % (0 of 2) - - - - - - - - Gender diversity, 2nd level management as per §99b 44% (4 of 9) Gender diversity, other management levels including 1st and 2nd level 31% (5 of 16) 28% (4 of 14) 21% (3 of 14) 26% (4 of 15) 20% (2 of 10) % Pay gap between genders, white collar Ratio m/f 1.28 1.18 - - - At A Glance Our business Perfomance Highlights ESG Corporate governance Financial statements ESG Statements TCM Group Annual report 2023 84 Social data OCCUPATIONAL HEALTH & SAFETY Safety in the workplace continues to be the number one priority at the production sites. At TCM Group we use near-miss work accidents reports to ensure a continued awareness of incidents that could result in an accident and as a mean to take preventive actions. The number of near-miss reports increased considerably in 2023 and we use this as an indication to the fact that our eﬀorts have an eﬀect. Accounting practices Sickness related absence does not include absence due to Number of near-miss work accidents registered during the ﬁnancial year. sick children and maternity leave. Despite increased eﬀorts in 2023 we had a total of 22 accidents. 12 of these accidents resulted in 57 days of absence. Even though the number of work-related accidents has increased in 2023, the number of sickdays related to accidents is signiﬁcantly lower than previous year. Engagement score is based on a 5-point scale Sickdays caused by work accidents includes all days (24 hours) where an employee has been absent in relation to work accidents. The absence ratio is the number of absent working hours divided by the total number of working hours. Lost frequency measures the number of work incidents with absence divided by million working hours. % of employees that participated in the engagement survey (performed every second year) Safety will continue to be on top of the agenda in 2024. TCM Group measure employee engagement score regu- lary, last time in year 2021. The next engagement review is scheduled for primo 2024. Our work with occupational health & safety aligns with UNGC principles 3,4,5 and 6. Accidents are primarily related to behavior, where employees in their eager to do a good job disregarded safety procedures. Reference 2021 report page unit 2023 2022 page 23-24 Occupational health and safety Absence ratio related to sickness in 2023 % # 3.21 4.38 3.3 Sickdays caused by work accidents 57 937 896 Lost frequency 11.5 - - Absence ratio related to work accidents % # 0.09 0.1 0.006 Near-miss work accident registrations 1,232 937 896 (5-point Employee engagement score scale) - - - - 4.2 92 Engagement survey participation % At A Glance Our business Perfomance Highlights ESG Corporate governance Financial statements ESG Statements TCM Group Annual report 2023 85 Governance data COMPOSITION OF BOARD OF DIRECTORS Governance data RISK & REGULATION In the diversity policy issued in 2022 we set a target for gender distribution and the status (independent/not independent) of board members. HOW WE DID In TCM Group we have a zero-tolerance approach to corruption and bribery. Thus, our policy is to comply with all applicable regulations and to promote anti-cor- ruption behavior in all our business relations. Our Code of Conduct lay out our zero-tolerance approach to cor- ruption for employees, suppliers, franchisees, and dealers. tem through an externally hosted website. The system is anonymous, and all communication is encrypted, which means that TCM Group is not able to trace any speciﬁc whistleblower report back to the reporting individual. TCM Group has a non-retaliation policy regarding any concerns reported. The number of the members of the board is counted at publication date. In 2023 we reached the target of equal gender distribu- tion, with 3 of the boards 7 members being female, we reach 43% representation of the underrepresented gender. The number of board meetings only include actual meetings, not other seminars, or committees. Attendance rate is calculated as board meetings attended relative to board meetings held. The gender diversity is presented as women of total members. No whistleblower cases were reported in 2023. With the acquisition of AUBO Production a number sup- pliers who had not previusly been subject to the TCM Group Code of Conduct were added. It is the axpectation that all suppliers will be covered in 2024. 6 of the 7 members are independent, this is well within the declared target. Accounting practices Whistleblower reports and cases resolved relates to the number of whistleblower reports to TCM falling within the correct use of the whistleblower scheme. There have been 15 board meetings which is 3 more than in 2022, the attendance rate was 98%. And independent board members show the percentage of the total board. Whistleblower system TCM Group whistleblower system is available for inter- nal and external reporting of any witnessed activities or reasonable suspicion of serious and reprehensible con- ditions or illegalities to the group. All internal and external stakeholders can access the whistleblower sys- The work with Code of Conduct and the whistleblower scheme relates to UNGC principle 10 – Anti-corruption. Reference report Reference report unit 2023 2022 2021 2020 2019 page unit 2023 2022 2021 page page 31 Composition of the board of directors Risk and regulation page 31-33 Suppliers covered by Code of Conduct, signed % # 82 0 100 0 100 0 Members of the board of directors # # 7 6 5 5 8 5 8 Whistleblower reports Whistleblower cases resolved Board meetings 15 12 11 % 100% 100% 100% Board meeting attendance % 98% 100% 100% 98% 98% Gender diversity, board of directors # % 3 of 7 43 % 1 of 6 17% 1 of 5 20% 1 of 5 20% 1 of 5 20% Percentage of independent board members % 86% 100% 100% 100% 100% At A Glance Our business Perfomance Highlights ESG Corporate governance Financial statements ESG Statements TCM Group Annual report 2023 86 Governance data REMUNERATION TCM Group remuneration policy is available at incentive scheme (cash or share based), and other beneﬁts in the form of usual non-monetary beneﬁts and reimbursement of expenses. Each element of the Tcmgroup.dk home page. The objective of the policy is to attract, motivate and retain qualiﬁed members of the Board of Directors and the Executive Management, ensure alignment between the interests of the Board of Directors and Executive Management with the interests of shareholders, and to contribute to the Company’s business strategy, long-term interests, and sustainability. remuneration has been weighted to ensure a continuous positive development of the TCM Group both in the short and long-term and the relative proportion between the elements are described below in relation to each element. Accounting practices Its TCMs policy that remuneration of the Board of Direc- tors and Executive Management shall be competitive and comparable to remuneration in other Danish and international companies which are comparable to the TCM Group. Shares held by the board of directors and by executive management is based on reported data. The CEO total compensation relative to average FTE total compensation is based on the average salary of an employee of TCM (excluding members of the executive management) The remuneration package for members of the Executive Management may consist of ﬁxed annual base salary, pension, a short-term cash bonus, a long-term Reference 2021 report page unit 2023 2022 page 32-33 Remuneration Shares held by members of the board of directors 46,456 40,625 91,602 38,125 Shares held by the executive management 61,302 49,902 CEO total compensation relative to FTE average total compensation 8.8 8.4 8.8

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