TCM Group

TCM-GROUP - 2022 TCM Group A/SSkautrupvej167500Holstebro37291269529900P5DOKT3XLWL4802022-01-012022-12-312021-01-012021-12-31

Dette er til corporate governancelink

http://investor-en.tcmgroup.dk/CorporateGovernance

Dette er til corporate governancelink

http://investor-en.tcmgroup.dk/CorporateGovernance

504Regnskabsklasse DÅrsrapport37291269TCM Group A/SSkautrupvej 167500 HolstebroxWizard version 1.1.1177.5, by EasyX Aps. www.easyx.euRevisionspåtegningGrundlag for konklusionKonklusion3377123133771231529900P5DOKT3XLWL4802022-01-012022-12-31529900P5DOKT3XLWL4802022-01-012022-12-31cmn:ConsolidatedMember529900P5DOKT3XLWL4802021-01-012021-12-31529900P5DOKT3XLWL4802022-12-31529900P5DOKT3XLWL4802021-12-31529900P5DOKT3XLWL4802021-12-31ifrs-full:ReserveOfCashFlowHedgesMember529900P5DOKT3XLWL4802021-12-31ifrs-full:IssuedCapitalMember529900P5DOKT3XLWL4802021-12-31ifrs-full:TreasurySharesMember529900P5DOKT3XLWL4802021-12-31ifrs-full:RetainedEarningsMember529900P5DOKT3XLWL4802021-12-31tcm-group:DividendForTheYear529900P5DOKT3XLWL4802021-12-31ifrs-full:EquityAttributableToOwnersOfParentMember529900P5DOKT3XLWL4802022-01-012022-12-31ifrs-full:ReserveOfCashFlowHedgesMember529900P5DOKT3XLWL4802022-01-012022-12-31ifrs-full:IssuedCapitalMember529900P5DOKT3XLWL4802022-01-012022-12-31ifrs-full:TreasurySharesMember529900P5DOKT3XLWL4802022-01-012022-12-31ifrs-full:RetainedEarningsMember529900P5DOKT3XLWL4802022-01-012022-12-31tcm-group:DividendForTheYear529900P5DOKT3XLWL4802022-01-012022-12-31ifrs-full:EquityAttributableToOwnersOfParentMember529900P5DOKT3XLWL4802022-12-31ifrs-full:ReserveOfCashFlowHedgesMember529900P5DOKT3XLWL4802022-12-31ifrs-full:IssuedCapitalMember529900P5DOKT3XLWL4802022-12-31ifrs-full:TreasurySharesMember529900P5DOKT3XLWL4802022-12-31ifrs-full:RetainedEarningsMember529900P5DOKT3XLWL4802022-12-31tcm-group:DividendForTheYear529900P5DOKT3XLWL4802022-12-31ifrs-full:EquityAttributableToOwnersOfParentMember529900P5DOKT3XLWL4802020-12-31ifrs-full:ReserveOfCashFlowHedgesMember529900P5DOKT3XLWL4802020-12-31ifrs-full:IssuedCapitalMember529900P5DOKT3XLWL4802020-12-31ifrs-full:TreasurySharesMember529900P5DOKT3XLWL4802020-12-31ifrs-full:RetainedEarningsMember529900P5DOKT3XLWL4802020-12-31tcm-group:DividendForTheYear529900P5DOKT3XLWL4802020-12-31ifrs-full:EquityAttributableToOwnersOfParentMember529900P5DOKT3XLWL4802021-01-012021-12-31ifrs-full:ReserveOfCashFlowHedgesMember529900P5DOKT3XLWL4802021-01-012021-12-31ifrs-full:IssuedCapitalMember529900P5DOKT3XLWL4802021-01-012021-12-31ifrs-full:TreasurySharesMember529900P5DOKT3XLWL4802021-01-012021-12-31ifrs-full:RetainedEarningsMember529900P5DOKT3XLWL4802021-01-012021-12-31tcm-group:DividendForTheYear529900P5DOKT3XLWL4802021-01-012021-12-31ifrs-full:EquityAttributableToOwnersOfParentMember529900P5DOKT3XLWL4802021-12-31ifrs-full:ReserveOfCashFlowHedgesMember529900P5DOKT3XLWL4802021-12-31ifrs-full:IssuedCapitalMember529900P5DOKT3XLWL4802021-12-31ifrs-full:TreasurySharesMember529900P5DOKT3XLWL4802021-12-31ifrs-full:RetainedEarningsMember529900P5DOKT3XLWL4802021-12-31tcm-group:DividendForTheYear529900P5DOKT3XLWL4802021-12-31ifrs-full:EquityAttributableToOwnersOfParentMember529900P5DOKT3XLWL4802021-12-31529900P5DOKT3XLWL4802020-12-31529900P5DOKT3XLWL4802022-01-012022-12-31cmn:ConsolidatedMember0529900P5DOKT3XLWL4802022-01-012022-12-31cmn:ConsolidatedMember1529900P5DOKT3XLWL4802022-01-012022-12-31cmn:ConsolidatedMember0529900P5DOKT3XLWL4802022-01-012022-12-31cmn:ConsolidatedMember1529900P5DOKT3XLWL4802022-01-012022-12-31cmn:ConsolidatedMember2529900P5DOKT3XLWL4802022-01-012022-12-31cmn:ConsolidatedMember3529900P5DOKT3XLWL4802022-01-012022-12-31cmn:ConsolidatedMember4529900P5DOKT3XLWL4802022-01-012022-12-31cmn:ConsolidatedMember5529900P5DOKT3XLWL4802022-01-012022-12-31cmn:ConsolidatedMember0529900P5DOKT3XLWL4802022-01-012022-12-31cmn:ConsolidatedMember1iso4217:DKKiso4217:DKKxbrli:sharesxbrli:pure Annual report 2022 TCM Group A/S, Skautrupvej 16, DK-Holstebro, Denmark, CVR Nr. 37291269 Chairman and CEO’s report Financial Highlights Our business Corporate governance ESG Financial statements TCM Group Annual report 2022 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 INFINITY Leaf Front page photo Chairman and CEO’s report Financial Highlights Our business Corporate governance ESG Financial statements TCM Group Annual report 2022 3 About TCM Group TCM Group is Scandinavia’s third largest kitchen manufacturer, with headquarter in Denmark and selling through approximately 140 stores across Scandinavia. The majority of our business is concentrated in Denmark with Norway being the primary export market. The product oﬀering includes kitchen, bathroom and storage solutions. TCM Group pursues a multi-brand strategy, under which the main brand is Svane Køkkenet and the other brands are Tvis køkken, Nettoline 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. 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. Manufacturing is to a large extent carried out in-house at three manufacturing sites located in Tvis and Aulum (in the western part of Denmark). TCM Group is listed on Nasdaq Copenhagen. Svane køkkenet 2 INFINITY Leaf 1 Nettoline Satin mat sort Chairman and CEO’s report Financial Highlights Our business Corporate governance ESG Financial statements TCM Group Annual report 2022 4 02 management report 05 Chairman and 13 Our business 26 ESG 14 Strategy and ﬁnancial targets 16 Danish design and Danish production 17 Risk management 27 28 29 31 Highlights 2022 ESG strategy and approach CEO’s report 06 Letter to our shareholders A sustainable work life We take responsibility New ways ahead 33 34 36 37 07 Financial Highlights 08 Financial Highlights 09 Business review 19 CoRporate governance 20 Corporate governance 22 Board of Directors and Executive Management Together we improve Governance ESG key ﬁgures 10 11 Key ﬁgures and ratios Financial review 24 Shareholder information 40 financial statements 41 consolidated financial 66 Financial statements of the 74 Statement by Management on the annual report statements Parent company 42 Income statement 67 Income statement 42 Statement of comprehensive income 43 Balance sheet as of 31 December 44 Statement of changes in equity 44 Cash ﬂow statement 74 Independent auditor’s reporT 67 Statement of comprehensive income 67 Balance sheet as of 31 December 68 Changes in shareholders´s equity 69 Cash ﬂow statement 45 Notes to the ﬁnancial statement 65 Deﬁnitions 69 Notes to the parent ﬁnancial statements Chairman and CEO’s report Financial Highlights Our business Corporate governance ESG Financial statements TCM Group Annual report 2022 5 At Svane Køkkenet, we are driven by innovation. We are constantly challenging the established by curiously going new ways. Chairman and CEO’s report S19 Brændt Grå Chairman and CEO’s report Financial Highlights Our business Corporate governance ESG Financial statements TCM Group Annual report 2022 6 At this time last year, with the Covid-19 raw materials and components we experienced throughout 2022. The higher input costs were passed on to our customers through multiple sales price increases, but naturally the mitigating impact from the sales price increases comes with some delay. As a consequence the signiﬁcant cost price inﬂation we saw in 2022 had a signiﬁcant adverse net inﬂuence on the earnings in TCM Group in 2022 as a whole. As the supply situation normalised towards the end of 2022, we expect a more stable input cost level for the coming year. The development in 2023 is characterised by a high degree of uncertainty with regards to the macro economic development and the derived eﬀect on the demand for kitchens. Macro economic headwind during 2022 with high pandemic receding, we, along with many others, had a clear expectation the exceptional year 2021 would be followed by a return to “normality” in 2022. Soon after, Russia invaded Ukraine, shattering any such hope and ensuring that 2022 would also be a year far from normal. Letter to our Shareholders inﬂation a.o. following the war in Ukraine, higher energy costs, higher interest rates etc. has led to a slowdown of the Danish housing market with a signiﬁcant drop in number of houses sold and order intake from house builders. This has impacted the kitchen market with lower demand especially within B2C. As a consequence of the above, we expect lower activity in 2023 in general and we believe B2C sales will continue to be low going into 2023. With Covid-19 behind 2022 started out optimistically and characterized by a high demand and activity level. Following the Russian invasion of Ukraine in late February uncertainty about supply chains in general and the risk of energy shortages in particular led to higher energy costs and higher raw material prices. Furthermore, the sharp increase in inﬂation prompted a signiﬁcant rise in interest rates and the booming housing market halted sharply during the year leading to a drop in the demand for kitchens. With the currently uncertain situation both economically and politically the outlook for the kitchen market in 2023 is very cloudy. We remain cautious and vigilant and ready to react to any changes in the demand situation. TCM Group beneﬁts from a high degree of variability in the cost base and thus is well suited to retain proﬁtability even under adverse conditions and we remain committed to develop our brands and the store network further in 2023. Based on the above, we have widened our range for the ﬁnancial outlook for 2023 compared to previous years. Our ﬁnancial outlook for full year revenue for 2023 is in the range of DKK 950- 1,050 million and adjusted EBIT in the range of DKK 70-100 million. 1,146 mio. 3.4% Given the backdrop of a general slowdown in the Danish kitchen market during 2022, we consider the organic like-for-like growth in our core business in Denmark of 4.5% as satisfactory. Furthermore, our strategic focus on the Norwegian market resulted in a revenue growth outside Denmark of 17.2% in 2022, albeit from a low starting point. Revenue Revenue growth During 2022, we added three new Svane Køkkenet stores in Norway as well as a new and unique ﬂagship store in the Copenhagen area. Furthermore, additional new stores were added to the Tvis køkken and Nettoline brands. We will continue to add more stores in Norway and to consolidate our strong position in the Danish market. Finally, we would like to thank our employees and business partners for their dedicated eﬀorts during a year with many challenges. With the slowdown in the danish kitchen market during 2022 in mind, the organic like-for-line growth in our core business in Denmark of 4.5% is deemed satisfatory. During 2022 the beneﬁt of our strong position in B2B were clearly demonstrated. As the slowdown in demand began to impact B2C sales in the second half of 2022, our sales were supported by a strong long tailed pipeline with B2B, which helped to keep production close to capacity throughout the year. However, the slowdown in B2C sales had a negative impact on the gross margin as it meant that high margin B2C sales were replaced by lower margin B2B project sales during the year. Thus the gross margin was negatively impacted by the change in sales mix in 2022. During 2022 we completed the share buy back program of DKK 150 million and cancelled c. 9% of the number of shares. In addition, we distributed an ordinary dividend of DKK 54 million. As a consequence of a higher degree of uncertainty, the Board of Directors has decided not to propose a distribution of an ordinary dividend, and instead propose to the upcoming Annual General Meeting, that a mandate is provided to the Board of Directors with the option to distribute a dividend during the second half of 2023 of up to DKK 30 million. Sanna Mari Torben Paulin Suvanto-Harsaae * Organic like-for-like growth in core business is revenue excluding 3rd party revenue and the merge the e-commerce activities Celebert/kitchn.dk. Chairman CEO In addition, gross margin was negatively TCM Group has been a member of the United National Global Compact since 2011 and commits to the 10 UNGC principles. impacted by the signiﬁcantly higher prices on Chairman and CEO’s report Financial Highlights Our business Corporate governance ESG Financial statements TCM Group Annual report 2022 7 We rethink expressions and materials. We add functional technology. This is how we create modern living spaces that add tranquility, energy and luxury to everyday life. Financial S12 RAW Ltd. highlights Chairman and CEO’s report Financial Highlights Our business Corporate governance ESG Financial statements TCM Group Annual report 2022 8 Financial highlights Total of Revenue, DKK revenue Growth Revenue AVERAGE NO. of EMPLOYEES Stores Other countries 10% (9) 94 1,146 3 496 (branded stores include Svane Køkkenet, Tvis køkken and Danish Nettoline stores) % 90% (91) Denmark (1,108) Mi0. (11) (504) 41 Adjusted EBIT, DKK Adjusted EBIT Margin NWC ratio (31 December) LEVERAGE RATIO (31 december) Svane Køkkenet 28 Tvis køkken 25 Nettoline 103 Mio. 9.0 % -5.0 % 2.35 (138) (12.4) (-7.4) (1.33) Chairman and CEO’s report Financial Highlights Our business Corporate governance ESG Financial statements TCM Group Annual report 2022 9 stated in the Annual report 2021, was DKK 1,150- 1,225 million. Business Within Svane Køkkenet a new unique ﬂagship store opened in the Greater Copenhagen area, and three new stores opened in Norway. This was oﬀset by a closure of the store in Taastrup as part of the restructuring of the store network, and the closure of a store in Mandal, Norway. Within Tvis køkken a new store opened in Slagelse, whereas a few Norwegian dealers converted to private label customers and transferred to Nettoline and thereby are no longer considered branded stores. In the Nettoline brand new stores opened in Næstved, Odense and Ringsted. review Reported revenue grew by 3.4% in 2022 to DKK 1,146 million (DKK 1,108 million). The organic like-for-like growth in the core business was 6.0% (revenue excluding 3rd party revenue and the merge of the e-commerce activities Celebert/ kitchn.dk). Revenue in Denmark grew from DKK 1,011 million in 2021 to DKK 1,032 million corresponding to an increase of 2.1%. The organic like-for-like The slowdown in the kitchen market during 2022 initially impacted the B2C sales, which declined in the second half of the year. The long term strategic focus on B2B pursued by TCM for a number of years proved its worth, as strong B2B pipeline ensured that overall sales remained strong in spite of the slowdown in B2C sales during H2 2022. However, the change in sales mix with lower B2C sales oﬀset by higher B2B project sales had a negative impact on gross margin. Furthermore, gross margin was growth in the core business in Denmark was 4.5% (excluding 3rd party revenue and the merge of the e-commerce activities Celebert/kitchn.dk). Revenue outside Denmark grew from DKK 97 million in 2021 to DKK 114 million corresponding to an increase of 17.2%. The growth was driven by both same store growth and revenue from new stores in Norway primarily within Svane Køkkenet. The number of branded stores increased to 94 during 2022. negatively impacted by signiﬁcant higher cost prices on raw materials and components. The higher input costs were passed on to our Tvis Køkken strategy of TCM Group. In 2022 TCM launched new products in all of the three brands a.o. the new H22 in Svane Køkkenet, Tirano Nordic oak in Nettoline, and the MG50 line in Tvis køkken. With the launch of INFINITY in Svane Køkkenet 2023, TCM Group takes another big step towards working with circular product design. the end of December 2022 the number of employees was 482. M-line Mørk Eg Momento Antracit Reported revenue of DKK 1,146 million was in line with the latest ﬁnancial outlook of DKK 1,120- 1,160 million. Initial ﬁnancial outlook for 2022, customers through multiple sales price increases during the year. However, the mitigating impact from the implemented sales price increases came with some delay resulting in a lower gross margin 20.4% compared to 23.0% in 2021. The focus on sustainability and our ESG strategy continued in 2022. Among other achievements TCM delivered a signiﬁcant reduction in the Co2 emissions of the group (scope 1+2) of 18% compared to 2021. This was a good step forwards towards the ambition of TCM, which is to achieve a Co2 neutral production by 2028. To promote diversity and inclusion, TCM during 2022 formed a diversity and inclusion policy, formalizing the work towards ensuring minimum 40% Within Svane Køkkenet a new unigue flagship store opened in The Greather Copenhagen area. Adjusted EBIT ended at DKK 103.4 million compared to DKK 137.8 million in 2021 and the latest ﬁnancial outlook in the range of DKK 100- 130 million. Initial ﬁnancial outlook for 2022, stated in the Annual report 2021, was DKK 140- 170 million. The average number of employees in 2022 was 496 compared to 504 in 2021. Towards the end of the year the third shift (night shift) was shut down and the organisation was restructured. The restructuring was implemented to mitigate the slowdown in demand and the third shift was discontinued as increased eﬃcienty in the production sites has increased the overall 94 Branded stores at the end of 2022 representation of the underrepresented gender throughout the organisation. Please refer to the ESG section for further information. Innovation and development of new attractively designed products following the latest trends and customer demands plays an important role of the production capacity in the remaining two shifts. At Chairman and CEO’s report Financial Highlights Our business Corporate governance ESG Financial statements TCM Group Annual report 2022 10 Key figures and ratios DKK’000 2022 2021 2020 2019 2018 DKK’000 2022 2021 2020 2019 2018 Income statement Revenue Growth ratios 1,146,052 1,108,274 1,024,588 1,006,942 899,911 Revenue growth, % Gross proﬁt growth, % Adjusted EBIT growth, % EBIT growth, % 3.4% -8.1% 8.2% -6.7% -1.4% 2.8% 1.8% -2.4% -9.0% -8.1% -8.2% 11.9% 6.4% 9.6% 6.1% 7.3% 10.1% 13.7% 21.6% 70.7% 116.1% Gross proﬁt 234,020 254,601 272,819 156,058 161,058 142,277 279,622 167,387 174,399 154,118 262,835 -24.9% -30.0% -36.3% Earnings before interest. tax. depreciation and amortisation (EBITDA) 114,864 121,342 96,913 155,365 154,674 139,707 153,594 155,590 145,672 Adjusted EBITDA Net proﬁt growth, % 8.3% Earnings before interest. tax and amortisation (EBITA) Margins Operating proﬁt before non-recurring items (Adjusted EBIT) 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 -4,201 140,108 138,112 -5,812 Gross margin, % 20.4% 10.6% 9.0% 23.0% 14.0% 12.4% 12.5% 26.6% 15.7% 13.6% 13.1% 27.8% 17.3% 15.3% 14.6% 29.2% 17.3% 15.6% 15.3% Operating proﬁt (EBIT) Adjusted EBITDA margin, % Adjusted EBIT margin, % EBIT margin, % Financial items Proﬁt before tax 142,357 111,322 132,300 103,710 8.5% Net proﬁt for the year Other ratios Balance sheet Solvency ratio, % 43.4% 2.35 46.3% 1.33 61.8% -0.23 51.9% 0.31 48.4% 0.58 Total assets 970,227 -57,080 288,112 420,629 907,321 -81,649 199,461 419,691 929,451 -116,978 -42,873 574,373 911,096 -108,868 51,702 844,044 -94,092 90,718 Leverage ratio Net working capital Net interest-bearing debt (NIBD) Equity NWC ratio, % -5.0% 2.0% -7.4% 2.6% -11.4% 3.0% -10.8% 1.5% -10.5% 1.0% Capex ratio excl. acquisitions, % 472,744 408,839 Cash Flow Share information Operating cash ﬂow before acquisitions of 39,478 22,696 61.0% 44,462 29,168 58.3% 101,048 30,993 85.8% 132,326 14,996 99.9% 141,409 9,192 Number of outstanding shares 9,067,294 9,074,847 75,000 7.77 9,174,073 10,000,000 10,000,000 10,000,000 9,584,933 10,000,000 10,000,000 10,000,000 operations Capex excl. acquisitions Weighted average number of outstanding shares Number of treasury shares Cash conversion, % 102.6% 825,927 11.55 0 10.22 10.22 0 11.13 11.13 0 10.37 10.37 Earnings per share before dilution, DKK Earnings per share after dilution, DKK * As of 1 January 2019 IFRS 16 Leases is implemented without restating comparative ﬁgures, why 2019 is not directly comparable to previus periods. 7.75 11.54 Reference is made to description in note 1 Accounting policies. Reference to deﬁnitions of Key ﬁgures and ratios - see page 65 Chairman and CEO’s report Financial Highlights Our business Corporate governance ESG Financial statements TCM Group Annual report 2022 11 Operating expenses - cost ratio 11.4% Revenue (DKKM) Adjusted Ebit (DKKM) Operating expenses in 2022 were DKK 130.6 million (DKK 116.8 million). The increase in operating expenses of DKK 13.8 million was primarily due to higher marketing spend a.o. related to product launches in all three brands, higher costs related to new stores opened during the year, and an increase in the provisions made to cover potential losses on debtors, given the higher macro economic uncertainty. Operating expenses amounted to 11.4% of revenue in 2022 against 10.5% in 2021. Financial 1400 1200 1000 800 600 400 200 0 220 200 180 160 140 120 100 80 review Revenue - 6.0% core organic like-for-like growth Revenue in 2022 grew by 3.4% to DKK 1,146.1 million (DKK 1,108.3 million). 60 40 Revenue in Denmark was DKK 1,032.5 million (DKK 1,011.4 million). The organic like-for-like growth in the core business was 4.5% excluding third party revenue and the eﬀect from the merge of the e-commerce activities in kitchn.dk and Celebert. Adjusted EBITDA – 10.6% margin Adjusted EBITDA in 2022 was DKK 121.3 million 20 0 (DKK 154.7 million), corresponding to an EBITDA margin of 10.6% (14.0%). The decrease in Adjusted EBITDA margin was primarily driven by a lower gross margin. Revenue in Other countries was DKK 113.6 million (DKK 96.9 million), up 17.2%. Adjusted EBIT – 9.0% margin Adjusted EBIT in 2022 was DKK 103.4 million (DKK 137.8 million), corresponding to an adjusted EBIT margin of 9.0% (12.4%). The decrease in adjusted EBIT was driven by a lower gross margin. Depreciations and amortizations were DKK 18.0 million (DKK 16.9 million). Gross profit - gross margin of 20.4% Gross proﬁt in 2022 was 234.0 DKK million (DKK 254.6 million), corresponding to a gross margin of 20.4% (23.0%). The merge of the e-commerce activities in kitchn.dk and Celebert had a technical negative impact on gross margin of 0.5%-point compared to 2021. The Russian invasion of Ukraine led to further input cost inﬂation, which has been mitigated through sales price increase. The impact from the sales price increases though implemented immediately came with some delay, and therefore the gross margin for the ﬁnancial year as a whole, has been negatively impacted by the rise of cost of raw materials and energy etc. During the second half of the year B2C sales declined resulting in a sales mix with a higher share of lower margin B2B project sales.The change in sales mix had a signiﬁcant negative impact on gross margin in the second half of the year. 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 2022 non-recurring items consist of costs related to Covid-19 and supply chain disruptions, restructuring costs related to the restructuring of the store network in the Greater Copenhagen area as well as organisational restructuring carried out during 2022. The non-recurring costs are partly oﬀset by a non-recurring gain from the ﬁnal earn-out from the Celebert/kitchn.dk transaction. The non-recurring items are speciﬁed next page: Reported revenue growth Adjusted EBIT margin 3.4% 9.0% * Figures in brackets refer to the corresponding period in 2021. Chairman and CEO’s report Financial Highlights Our business Corporate governance ESG Financial statements TCM Group Annual report 2022 12 Net working capital (dkkm) chain disruptions. As the supply chain situation normalised during 2022, the buﬀer levels for inventory were reduced towards the end of the year. due to the completion of the share buyback program initiated in 2021 and the distribution of dividend of DKK 54.4 million. non-recurring items Non-recurring items, DKK m 2022 2021 0 -20 Costs related to Covid-19 and supply chain disruptions Equity - solvency ratio 43.4% 5.4 4.7 14.0 1.3 Trade receivables and other receivables increased by DKK 9.9 million. The increase was driven by higher trade receivables due to accruals as a result of the normal production shutdown during Christmas holidays starting later than previous years leading to a higher number of outstanding debtor days as of 31 December compared to 2021. Other receivables as of 31 December 2022 is excluding the value of DKK 8.3 million, which relates to subleases due to the implementation of IFRS 16. This is not included in the net working capital. Equity at the end of 2022 amounted to DKK 420.6 million (DKK 419.7 million). The equity increased by DKK 0.9 million since 1 January 2022. The net proﬁt for the year was oﬀset by the dividend distribution of DKK 54.4 million and the completion of the share buy back program initiated in 2021, of which DKK 14.4 million of the total of DKK 150 million has been carried out during 2022. -40 Restructuring -60 Net gain from the Celebert/ kitchn.dk transaction -3.5 -13.5 -80 -100 -120 -140 -160 -180 Gain from the divestment of an own operated store 0.0 -2.5 Total 6.5 -0.7 EBIT The solvency ratio was 43.4% at the end of 2022 (46.3%). EBIT for the ﬁnancial year 2022 was DKK 96.9 million (DKK 138.4 million). The decrease in EBIT compared to 2021 was driven by a lower gross margin and non-recurring costs. The operating liabilities decreased by DKK 11.8 million driven by lower trade payables due to a reduction in supply of raw material towards the end of the year as the buﬀer levels for inventory were reduced. Events after the balance sheet date Apart from the events recognized or disclosed in the annual report, no other events have occurred after the balance sheet date to this date which would inﬂuence the evaluation of this annual report. Net profit Net proﬁt for the ﬁnancial year 2022 was DKK 70.5 million (DKK 110.7 million). Equity at the end of Net interest-bearing debt – leverage ratio 2.35 Free cash flow excl. acquisitions of operation Free cash ﬂow excl. acquisitions of operations for 2022 was DKK 39.5 million against DKK 44.5 million in 2021. Free cash ﬂow was negatively impacted by a lower operating proﬁt and a change in NWC of DKK -35.9 million compared to DKK -38.3 million in 2021. Net interest-bearing debt amounted to DKK 288.1 million at the end of 2022 (DKK 199.5 million). The increase in net interest-bearing debt was a.o. 2022 amounted to DKK 420.6 million. The sol- vency ratio was 43.4% at the end of 2022. Cash conversion in 2022 was 61.0% (58.3%). Net working capital - NWC ratio -5.0% Net working capital at the end of 2022 was DKK -57.1 million (DKK -81.6 million). NWC ratio at the end of 2022 was -5.0 (-7.4%). NWC ratio (%) Leverage ratio The increase in inventory of DKK 2.9 million was due to impact from increased raw material prices. During the unstable supply situation during the Covid-19 pandemic,it was decided to increase inventory levels to create a buﬀer against supply -5.0 2.35 Tvis Køkken M-line Eg Momento Kridt Hvid Chairman and CEO’s report Financial Highlights Our business Corporate governance ESG Financial statements TCM Group Annual report 2022 13 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. TIRANO MØRK EG Our Business Chairman and CEO’s report Financial Highlights Our business Corporate governance ESG Financial statements TCM Group Annual report 2022 14 We will be the customers’ first We create better kitchen environments for the heart of your home choice of kitchens 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 Chairman and CEO’s report Financial Highlights Our business Corporate governance ESG Financial statements TCM Group Annual report 2022 15 Strategy 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. During 2022 we have put even more eﬀort into product development for the Tvis køkken brand through the new MG50 line designed by Morten Georgsen and a repositioning of the brand a.o. via a new logo. In all that we do, we are determined to do this as responsible as possible with regards to people, planet and products. A cross functional task force is identifying and driving initiatives within these three important areas. We refer to the separate ESG section for further elaboration of our strategic targets and initiatives. TCM Group’s overall strategy is to aim for double-digit annual growth rates 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 attractive acquisition opportunities primarily in Scandinavia. Strategy and financial targets Even though we invest in growth, our target is to remain in the top tier of the kitchen industry with regards to profit- ability and cash flow. The Nettoline brand is selling through single brand stores in Denmark and multibrand stores in Norway. In both markets there is 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. Strategic choices and initiatives in the growth strategy: The Svane Køkkenet branded store network is fully established in Denmark, however there is still room for growing market share, both within the B2C and the B2B segment. In recent years we have increased our focus 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, which is a positive factor in case of a recession scenario. Towards the end of 2022 the strategy has proven to be right as we have seen a slowdown in the B2C segment, whereas the order intake in B2B remained solid. To further strengthen the distribution network in the B2B segment, we have built cluster store networks in the three biggest cities in Denmark in cooperation with our franchisees. Financial outlook 2023 TCM Group estimates revenue for the ﬁnancial year 2023 to be in the range DKK 950-1,050 million. 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 during 2022 we started selling to the Norwegian and Swedish markets through the online channel. EBIT is estimated to be in the range DKK 70-100 million. EBIT excluding 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. 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. To support the growth ambitions in all brands and markets, we continue to invest in increased capacity and ﬂexibility in our three factories, step by step as demand emerge short-term while also having a focus on supporting our long-term growth ambitions. Furthermore, we focus on increasing productivity and eﬃciency as well as improving quality. We will invest in further digitalizing all important processes in the supply chain, in the administration and in the retail network, and thereby continuously improve and strengthen the entire value chain of our business. 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. 3 new stores opened during 2022, and the search for further new stores is ongoing. As market share and brand awareness for the Svane brand in Norway is relatively low, same store growth and marketing activities will grow hand in hand over the coming years. Chairman and CEO’s report Financial Highlights Our business Corporate governance ESG Financial statements TCM Group Annual report 2022 16 Aulum Store openings Danish design production sites 2022 Tvis and danish production TCM Group’s production sites are located in Tvis and Aulum, with two factories in Tvis and one factory in Aulum. Total store openings branded stores 8 (branded stores include Svane Køkkenet, Tvis køkken and Danish Nettoline stores) 4 Svane Køkkenet Tvis køkken 1 3 Nettoline 31 december 2022 94 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 140 Cabinets Fronts Faroe Islands stores across Scandinavia E-COMMERCE IN CELEBERT Private Label Denmark Norway Sweden Denmark Norway Sweden Iceland Denmark Norway Iceland Faroe Islands Faroe Islands Chairman and CEO’s report Financial Highlights Our business Corporate governance ESG Financial statements TCM Group Annual report 2022 17 risk management 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. Business risks require ﬁnancing and the Group may need to incur futher debts or raise further equity capital to fund its acquisitions. Production risks Market risks The Group is exposed to risks of not being able to fulﬁll customer orders e.g., due to ﬁre, machine failure or lack of personnel. Fire prevention is a management priority and is carried out in The Group is exposed to a decline in new housing construction and home sales as well as developments in the overall economy. The Group is order producing with a high degree of ﬂexibility in the workforce, which means that the Group can respond quickly to market demand changes. Customer risks The Group’s risks relate primarily to the sales development of the stores, with sales being distributed through 94 Branded stores. Having typically a fragmented ownership of the stores, the operational risk is reduced. The debtor risk related to the stores represents the main ﬁnancial risk and is closely monitored to minimize losses by primarily requiring appropriate collateral for current trading. cooperation with our insurance company. We have our own maintenance department who in cooperation with external experts conduct the necessary machine maintenance and repairs. 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. Reputational risks Finally, we have a constructive cooperation with our production employees typically based on multi-year collective wage negotiation agreements. The Group considers the Svane Køkkenet, Tvis køkken and Nettoline brands to be some of the most important assets of the business. Thus, it is the Group’s policy to register its trademarks and design rights in the main markets in which its products are sold. 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 risk management, including internal controls in the ﬁnancial reporting process, is designed to eﬀectively minimize the risk of errors and omissions in the ﬁnancial reporting. Raw material purchasing risks TCM Group aims to have multiple suppliers in each raw material category in order to improve commercial terms as well as to ensure adequate supply. 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. Following the Covid-19 outbreak, 2022 has been charaterized by global supply challenges and high inﬂation. TCM Group has mitigated the higher level of input costs through sales price increases. However, the eﬀect from the sales price increases have come with some delay. Strategy risks The success of the Group’s strategy is subject to several factors, some of which depend in full or in part on the Group’s ability to successfully execute certain initiatives, e.g. expansion via acquisitions of other players in the industry. Such acquisitions Below are the main identiﬁed business and ﬁnancial risks as well as comments on the actions undertaken within the individual areas: Chairman and CEO’s report Financial Highlights Our business Corporate governance ESG Financial statements TCM Group Annual report 2022 18 Risks related to IT It is Management’s assessment that the current capital structure provides the necessary ﬂexibility to accelerate and support the Group’s future strategy. 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. Credit risk The Group’s customer base comprises both professional customers and consumers. Credit management and payment terms are monitored for each customer group. The Group primarily provides credit to franchisees and dealers, which are the Group’s primary customers. Credit assessments are continuously performed on customers who make regular purchases. Bank guarantees, credit insurance, bank guarantees and other collaterals are utilized for the diﬀerent markets and customer categories. Risks related to pollution and occupational health 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. Currency risks The Group is insured against signiﬁcant damage to property, plant and equipment and is in close dialogue with authorities and insurance 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 EUR area. 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. Close to all revenue relates to Denmark, the rest of the Nordic region or the EUR zone and, therefore, foreign exchange risks are limited. companies with a view to further improving the mitigation of risks related to, inter alia, ﬁre and pollution. Production facilities are fully sprinkled and emphasis is placed on maintaining a high level of ﬁre hygiene in the Group. Financial risks Liquidity risks 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 overall goal is to secure a capital structure that supports long-term proﬁtable growth. Interest rate risk 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 TCM Group’s proﬁt of c. DKK 2 million. The Group’s ﬁnancial risks are managed centrally as well as the Group’s liquidity management, including cash requirement and placement of excess liquidity. Svane Køkkenet Snedker Chairman and CEO’s report Financial Highlights Our business Corporate governance ESG Financial statements TCM Group Annual report 2022 19 A Tvis kitchen is a long-term choice of Danish quality for your home. We know because in 2022 we have been making kitchens for 70 years. Corporate MG 50 Governance Chairman and CEO’s report Financial Highlights Our business Corporate governance ESG Financial statements TCM Group Annual report 2022 20 ensure continuous value creation. The Nomination Committee DATA PROTECTION POLICY 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 accessible on our website at 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 Management, which are reviewed annually and approved by the Board of Directors. 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 Corporate governance investor-en.tcmgroup.dk/CorporateGovernance TCM Group is committed to ex- ercising good corporate gover- nance, and the Board of Di- rectors therefore evaluates the Group’s management systems at least once a year to ensure that the structure is appropriate relative to the Group’s share- holders and other stakeholders. Composition of the Board of Directors 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 4 meetings in the ﬁnancial year 2022. The Board of Directors currently consists of six members elected at general meetings 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 of the Board of Directors elected by the shareholders are regarded as independent. Corporate governance recommendations 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 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 3 meetings in the ﬁnancial year 2022. Nasdaq Copenhagen has incorporated the recommendations of the Danish Committee on Corporate Governance in its Rules for Issuers of Shares. These The Board of Directors determines once a year the 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. recommendations are available at the website of the Committee on Corporate Governance, www.corporategovernance.dk. TCM Group complies with all these recommendations. The Group’s corporate governance statements are available on our website at 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 holds 6 ordinary meetings each year and will further convene as needed. In the ﬁnancial year 2022, 12 board meetings were held. investor-en.tcmgroup.dk/CorporateGovernance Audit Committee The Board of Directors has set up an Audit Committee. The Chairman of the Audit 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 2022. 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 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 12 Board meetings in 2022 considers the group’s overall strategy in order to Chairman and CEO’s report Financial Highlights Our business Corporate governance ESG Financial statements TCM Group Annual report 2022 21 the Board of Directors, the Executive 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 4 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 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 mitigating the risk associated with the ﬁnancial reporting. Copenhagen. The internal controls and procedures in relation to the ﬁnancial reporting process include, among other things: • Weekly reports of incoming orders and gross and net revenue by month; 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. • Monthly revenue reports, on a per store basis, of the Group’s sales to stores; • 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; 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. Tax-policy - Our tax policy is designed • Four-eye principle within the ﬁnance department to ensure the quality of the accounting records; so as to achieve a competitive taxation level in a socially responsible manner. • The predominant majority of all invoices received go through a standardised Read more on our website. 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 authorisation process. In addition, a detailed review of cost on account level is made in connection with the monthly reports. SVANE Køkkenet S12 HAVGRØN Chairman and CEO’s report Financial Highlights Our business Corporate governance ESG Financial statements TCM Group Annual report 2022 22 Board of Directors and Executive Management Board of Directors Chairman of Nomination Committee and Remuneration Committee and member of Audit Committee. Independent. Member since: 2016 Chairman of Audit Committee and member of Nomination Committee and Remuneration Committee. Independent. Member since: 2017 Member of Nomination Committee and Remuneration Committee. Independent. Member since: 2018 Participated in 12 board meetings in 2022. Number of shares end 2022: 2,441 (2021: 2,441) Participated in 12 board meetings in 2022. Number of shares end 2022: 19,781 (2021:19,781) Participated in 12 board meetings in 2022. Number of shares end 2022: 10,153 (2021: 7,653) 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. Anders Skole-Sørensen holds a MSc econ. from the University of Copenhagen. Other positions: Other positions: Other positions: Carsten Bjerg is deputy chairman of the board of Sanna Mari Anders CARSTEN BJERG Sanna Mari Suvanto-Harsaae is member of the executive management of Rakaas ApS. Sanna Mari Suvanto-Harsaae is chairman of the board of Babysam A/S, Nordic Pet Care Group A/S, BoConcept A/S, Orthex Oyj, and Posti Oy. Sanna Mari Suvanto- Harsaae is also member of the board of directors of Elopak AS, Broman Group Oyj and CEPOS. Anders Skole-Sørensen is a member of the board in Firtal Group ApS. and a member of the board of directors of F. Uhrenholt Holding A/S. Suvanto-Harsaae Skole-Sørensen directors of Rockwool International A/S (listed on Nasdaq Copenhagen), COWI Holding A/S, Bjerringbro-Silkeborg Håndbold A/S, and Aarhus University. Carsten Bjerg is chairman of the board of directors of Guldager A/S, Robco Engineering A/S, Hydrema A/S, Bogballe A/S, and Arminox A/S. Carsten Bjerg is member of the Board of directors of Dansk Smede- og Maskinteknik A/S, and Agrometer A/S. Chairman of the company Deputy Chairman Board member Danish nationality. Born in 1962. Danish nationality. Born in 1959. Danish and Finnish nationality. Born in 1966. Independent. Member since: 2018 Independent. Member since: 2019 Independent. Elected in 2022. Participated in 12 board meetings in 2022. Number of shares end 2022: 3,850 (2021: 3,850) Participated in 12 board meetings in 2022. Number of shares end 2022: 4,400 (2021: 4,400) Participated in 7 board meetings in 2022. Number of shares end 2022: 0 (2021: 0) Søren Mygind Eskildsen holds a Bachelor of Engineering and MBA from the Southern University of Denmark. Danny Feltmann Espersen holds a MSc in accounting and Finance from Aarhus Business School. Jan Amtoft holds a Bachelor of Computer Science (Hons) from DeMontfort University. Other positions: Other positions: Other positions: Søren Mygind Eskildsen is CEO of Louis Poulsen A/S. Chairman for BeckSöndergaard Holding Anno 2022. Jan Amtoft is CIO at Rockwool A/S. SØREN MYGIND ESKILDSEN Danny feltmann espersen Jan Amtoft Søren Mygind Eskildsen is chairman of board of directors of Ege Carpets A/S. Board member Board member Board member Danish nationality. Born in 1964. Danish nationality. Born in 1972. Danish nationality. Born in 1968. Chairman and CEO’s report Financial Highlights Our business Corporate governance ESG Financial statements TCM Group Annual report 2022 23 Executive Management Since March 2020 Since 2015 Number of shares end 2022: 48,125 (2021: 10,000) Number of shares end 2022: 43,477 (2021:39,902) 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. Prior to joining the Group, Mogens Elbrønd Pedersen had worked with Bang & Olufsen A/S (listed on Nasdaq OMX Copenhagen), Bestseller and PwC. Other positions: Torben Paulin is member of the board of directors of Zefyr Invest A/S. Torben Paulin Mogens Elbrønd Pedersen Chief Executive Chief Financial Oﬃcer Oﬃcer Danish nationality. Born in 1965. Danish nationality. Born in 1975. Svane Køkkenet Garderobe Snedker Chairman and CEO’s report Financial Highlights Our business Corporate governance ESG Financial statements TCM Group Annual report 2022 24 Shareholder information Financial calender TCM Group share price development in 2022 During 2022 TCM Group completed the share buy back program totalling DKK 150 million, and following the Annual General Meeting in April 2022, the number of shares was reduced by 9%. The nominal value of the company’s share capital at 31 December 2022 was DKK 0.9 million divided into shares of DKK 0.1, equivalent to 9.1 million shares and 9.1 million votes. As of 31 December 2022, TCM Group A/S owns 75,000 treasury shares, corresponding to 0.8% of the share capital. 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 2023: TCM Group A/S is a part of the Nasdaq OMX Copenhagen Mid Cap index. The development in TCM Group’s share price during 2022 has been aﬀected by the general negative sentiment in the stock market with high macro-economic uncertainty, increasing interest rates, and a declining housing market. In line with peers the share price declined to DKK 73 on 31 December 2022 from an opening value of DKK 159. Average share price during 2022 was DKK 89. At 31 December 2022, the following shareholders had notiﬁed shareholdings above 5% of the share capital (see below). Members of the Board of Directors held at 31 December 2022 40,625 shares (31 December 2021 38,125 shares), and members of the Executive Management held 91,602 shares (31 December 2021 49,902 shares), in total 132,227 shares (31 December 2021 88,027 shares), equivalent to 1.4% of the share capital (31 December 2021 0.9%). 13 April 2023 Annual general Meeting 2023 17 May 2023 Interim report Q1 2023 18 August 2023 Interim report Q2 2023 Business 17 November 2023 NAme registration no Domicile Share Interim report Q3 2023 BI Asset Management Fondsmæglerselskab A/S Paradigm Capital Value Fund Arbejdsmarkedets Tillægspension Handelsbanken Fonder AB 20896477 B129149 Copenhagen, Denmark Luxembourg, Luxembourg Hillerød, Denmark 12.3% 10.8% 10.1% 6.9% 6.1% 28 February 2024 Interim report Q4 2023 and Annual report 2023 43405810 556418-8851 B232467 Stockholm, Sweden Leudelange, Luxembourg Dublin, Ireland Luxempart S.A. Taiga Investment Funds PLC Paradigm Capital Value LP C49550 5.3% 5.2% 11 April 2024 Annual general Meeting 2024 99-0375707 Delaware, USA Chairman and CEO’s report Financial Highlights Our business Corporate governance ESG Financial statements TCM Group Annual report 2022 25 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 During 2022, TCM Group distributed an ordinary dividend of DKK 6 per share. Excluding treasury shares this corresponds to a total distribution of DKK 54 million. For the ﬁnancial year 2022, the Board of Directors has decided not to propose a distribution of an ordinary dividend, and instead propose to the upcoming Annual General Meeting, that a mandate is provided to the Board of Directors with the option to distribute a dividend during the second half of 2023 of up to DKK 30 miliion. Analyst coverage TCM Group is currently covered by ﬁve analysts: ABG Sundal Collier Benjamin Silverstone Aktieinfo John Stihøj Carnegie Frederikke Due Olsen Danske Bank Poul Ernst Jessen SEB Ulrik Bak Contact For further information, please contact: CEO Torben Paulin +45 21210464 CFO Mogens Elbrønd Pedersen +45 97435200 IR Contact mail: [email protected] 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. 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, 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. Annual general meeting The annual general meeting will be held on Thursday, 13 April 2023 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: 9.1 million shares of DKK 0.1 each with one vote Share classes: 1 Tvis Køkken M-line Mørk Eg Momento Antracit Sector: Kitchens, bathrooms and storage Segment: MID CAP Chairman and CEO’s report Financial Highlights Our business Corporate governance ESG Financial statements TCM Group Annual report 2022 26 Responsibility and 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. The chipboards that TCM Group uses for production consists of min. 90% recycled timber INFINITY Leaf ESG Chairman and CEO’s report Financial Highlights Our business Corporate governance ESG Financial statements TCM Group Annual report 2022 27 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. UN Sustainable development goals (SDG) Highlights 2022 This section covers Communication on Progress according to United Nations Global Compact and the statutory statement by the Danish Financial Statements’ Act 99a, 99b, 99d and 107d. Co2 emission reductioN 2022 (scope 1 and 2) Accidents 2022 Compared to 2021 Sickdays caused by work accidents 2022 2021 125 indoor climate certified Kitchen models certiﬁed: 100% 58 Absence ratio related to work accidents in 2022 18% 0.1% Gender equality TCM Group has a target of having equal gender representaton on the Board of Directors before 2026. As of 31 Waste recycle 2022 83% December 2022, the distribution is 17%/83% underrepresented gender, which means that the target is not met. By weight RE:USE Our ESG mindset RE:DUCE Board of directors 17% 83% Board of directors Management 28% 72% employees 36% 64% RE:THINK 17% 90% Chairman and CEO’s report Financial Highlights Our business Corporate governance ESG Financial statements TCM Group Annual report 2022 28 ESG strategy & approach Our value chain impact The largest share of our impact in terms of sustainability originates from our value chain. As a result, we work actively to promote sustainability throughout the entire value chain with innovative product design, close cooperation with business partners, and a constant focus to improve across our value chain Building on our longstanding commitment to responsibility we are very conscious of our responsibility towards society. Responsibility towards the environment, responsibility towards our customers, and responsibility towards our employees and stakeholders. In 2021 we launched our ESG strategy setting the direction to embed sustainability ever deeper in the way we do business. A strategy that is guided by the UN Sustainable Development Goals and builds on our core values and brands - and integrating Product Production of raw materials Transport of raw materials Manufacture sustainability throughout our value chain from raw materials to after-sales and service. development We develop high-quality products with long durability and sustainability is an integrated part of our design process. We work closely with our suppliers on social, environmental, and ethical issues and the majority of our sourcing is locally based. We work actively together with our suppliers to secure and promote the optimal form of transport. We work continuously with optimizing and minimizing the use of materials in manufacturing with an ongoing focus on health and safety. Our ESG strategy sets out transformative targets to drive decisions and actions within four areas of priority: • • • • A sustainable work life We take responsibility New ways ahead Together we improve 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. Waste and recycling We work with materials and processes based on the foundation of RE:DUCE – RE:USE – RE:THINK and promote circular design and materials. Use Transport Sales We ensure our kitchens are durable, of high quality, and labeled with the indoor climate certiﬁcate to reduce the impact on the indoor environment. The kitchens are customized to the customer’s speciﬁc needs to prolong the lifetime. We collaborate very closely with our external distributors to maximize truck loads and minimize distance. We inspire, inform and challenge to provide the most sustainable solution for our customers. TCM Group has been a signatory to the UN Global Compact for more than a decade, and this ESG section serves as our annual Communication on Progress. We commit to the Ten Principles of the UN Global Compact on human rights, labor, environment, and anti-corruption. Chairman and CEO’s report Financial Highlights Our business Corporate governance ESG Financial statements TCM Group Annual report 2022 29 all, we celebrate the joint victories that the individual teams achieve. 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. A sustainable 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 comploy with these principles. work life Work safety has a great impact on employees and their families, as well as communities and the business. In 2022, we have increased the number of working environment representatives and all representatives have obtained training in both physical and mental working environments. The latter includes speciﬁc upskilling on for example “the diﬃcult conversation” with employees and colleagues. We already see early results in terms of an increase in knowledge sharing across locations and a reinforced focus on behavior and safety culture based on zero accidents. 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 responsibility toward others. We meet Danish and 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. UN Global Compact principle 1, 2, 3, 4, 5, 6, 10 TCM Group’s continued success is relying 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 "a sustainable work life" characterized by the following principles Sickdays and absence #sickdays caused by work accidents 2022 125 2021 2020 • • A safe and secure work environment that also enhances personal development. 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 2022, we had a total of 19 accidents. Elleven accidents have resulted in a total of 125 days of absence after the accident. The other eight 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. The accidents were primarily related to behavior, where employees in their eager to do a good job disregarded safety instructions.The increase in number of accidents has been less signiﬁcant, and the large increase in the number of absences caused by accidents was driven by a few more severe accidents. We have further increased the focus on behavior and emphasized that no matter what, personal safety always come ﬁrst. Safety will continue to be on top of the agenda in the year to come. 58 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 35 and page 36). Flexibility to support a clear balance between work/private life, between individuals, teams, and organization. 34 Absence ratio related to • Diversity and social commitment. 0.1% work accidents in 2022 We pay high respect for every single individual balanced with an understanding of the role we each must fulﬁll in the organization. But most of Absence ratio related to 4.38% sickness in 2022 Reported near miss work accidents #of reported near miss work accidents in TCM Group Case: Code of Care Our participation in the Code of Care is already showing a good impact. In 2022 engaged with a person with social autism that since starting a ﬂexible job has been able to increase working hours and next up is getting a truck certiﬁcate – a wish that seemed unrealistic to deliver on just a year ago. 2022 937 896 2021 2020 Focus on ongoing learning One of the guiding principles for sustainable 1,159 working life is the training of our employees. Chairman and CEO’s report Financial Highlights Our business Corporate governance ESG Financial statements TCM Group Annual report 2022 30 We strive to continuously upskill our employees, so the value of the individual employee increases and the employee skills remain relevant both inside as well as outside of TCM Group. We work continuously with apprentices in TCM Group and in 2022 we had 6 apprentices in the Group. We have become more focused on hiring 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 Gender diversity (# of underrepresented gender) Besides working with learning and training internally, our TCM Learning platform also covers the training of sales staﬀ for our brands and kitchen installers. In 2022, we have strengthened the competencies in TCM learning and we have taken active steps towards making training available when it is most relevant for the individual employee. In contrast, to oﬀer a ﬁxed course in a speciﬁc time slot. The objective is that the learning should be available when the employee needs it and can apply the learning in practice. 2022 2021 2020 clariﬁcation processes in close collaboration with the municipality. Board of directors 1 of 6 1 of 5 1 of 5 (17%) (20%) (20%) 17% 83% 72% 64% A talented and diverse workforce Mgmt. (executive mgmt. and mgmt. group) 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. 4 of 14 (28%) 3 of 14 (21%) 4 of 15 (27%) 28% 36% Total workforce of underrepresented gender 36% 32% 29% In 2022 we developed a new e-learning platform as part of TCM-learning. All our employees have been oﬀered a module focusing on ESG basics and the ESG strategy in TCM Group. 39% of our employees have completed the ESG training in 2022. In 2023 we continue training and expand our training catalogue to include training on sustainability in a commercial context including a focus on sustainable building schemes such as DGNB. 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 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 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 36). right direction. For instance, we employed 28 refugees from Ukraine despite language diﬃculties. Even though the language is a barrier, by using on-job training and assigning mentors we succeeded in creating well functioning and balanced teams. 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. appropriate equal distribution of men and women in managerial positions. To promote diversity and inclusion, we have during 2022 formed a diversity and inclusion policy. The policy is available on TCM Group homepage. We constantly strive to ensure that every employee has the same Compensation The current composition reﬂects the traditional gender distribution within manufacturing 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. companies, where there is a predominance of male foremen, and at the administrative level, a slight predominance of female employees occurs. 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. In 2022, the Group joined the work of Code of Care, a non-proﬁt organization that works to help citizens on the edge of the labor market back into regular employment. The work takes place within the framework of a task force consisting of local companies, which together identify "small jobs" that help citizens on the road to a A barrier for TCM Group to attract the right candidate and ensure a diverse workforce is the fact that many of our staﬀ do not speak other languages than Danish and the company Male/Female white collar only 1.18 8.4 CEO total compensation relative to FTE average total compensation language is Danish. This a challenge that we are very much aware of. As with everything else in our business we are constantly challenging ourselves and trying to move the needle in the * We exclusively report on white collar as the hourly wage is calculated hourly and there is no diﬀerentiation. We seek to promote diversity and achieve sensible gender diversity in both the Board of directors and permanent connection to the labor market. Chairman and CEO’s report Financial Highlights Our business Corporate governance ESG Financial statements TCM Group Annual report 2022 31 Finally phasing out the surface treatment system based on natural gas, as well as the transition from natural gas to district heating and heat pumps are all important contributors to the positive development. This has led to a reduction in gas consumption at our production sites corresponding to respectively 15-20% and a reduction in consumption of oil for heating by more than 80%. We take Case: Employee engagement in energy savings Due to the increased societal focus on energy savings and responsibility optimization TCM employees have initiated electric walks in production. Electric walks are comparable to safety walks focusing on healthy work environments but only this time with healthy energy usage as the focal point. In practice, a cross-functional team of employees, management, and maintenance used their breaks to walk through our buildings looking for new ways to reduce our energy consumption and use the energy smarter. Several, both small and large, energy-saving projects were identiﬁed resulting in an increased focus on habits and behavior and a showdown with “what we usually do”. Examples of identiﬁed savings potentials are idle consumption during lunch breaks and the timespan needed for pre-heating a selection of production equipment. Nonetheless, we have continued our search for energy savings and identiﬁed new potential CO2 reductions that will contribute to lowering our total emissions. Examples are additional energy reductions on electricity and heating, transition to renewable energy sources, and signing a contractual power agreement ensuring that from January 1st, 2023, our electricity consumption will be fully covered by renewable energy UN Global Compact principles: 7, 8, 9 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. certiﬁcates from wind and solar power. Furthermore, TCM Group is following the Danish government's guidance on how to save energy and has reduced the temperature to 19 degrees Celsius to mitigate the increased energy costs for all of us. 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). During 2022, TCM Group reduced its total emission for scope 1 and 2 by 18% compared to 2021. These reductions have been enabled through investments in new lacquering systems, switching from ICE forklifts to electric, and implementation of heating and energy-saving projects, but also as a direct result of an increased focus on habits and behavior during our daily operations. Distribution of Co2 emission During 2022 TCM Group has started to analyze our scope 3 emissions. Our aim is that we no later than 2025 have a full understanding of our scope 3 emissions and will be able to report on our scope 3 ambition and progress. Transport 2022 2021 10% 8% Electricity 46% 44% Heating Emission per 1 mDKK net revenue in ton CO2 e/mDKK As part of this increased focus on habits, we have engaged our colleagues in idea generation on new ways to reduce energy consumption and CO2 emissions. This has led to several tangible proposals for the optimization of our daily operations, which will support our continued focus on both investments in energy optimization and good behavior in terms of energy usage. 44% 48% 2022 1,7 The shift in the distribution of TCM Group C02 emission in 2022 compared to 2021, is a direct result from decrease of our consumption for both electricity and district heating. At the same time the ﬂeet has increased. 2021 2.1 Chairman and CEO’s report Financial Highlights Our business Corporate governance ESG Financial statements TCM Group Annual report 2022 32 Electricity consumption Waste Even though we continuously ﬁnd new purposes for our waste, we still have smaller material categories in our production currently used as energy recovery, or hazardous waste. However, we have in 2022 taken yet another important step towards our 2025 ambition of recycling 99.7% (based on weight) of all material categories. The consumption of electricity in relation to revenue has decreased by 17% during 2022 compared to the year before. The direct savings was because TCM Group has made several investments to increase energy eﬃciency and actively promoted how daily awareness and behavior can aﬀect energy eﬃciency at our production facilities. For now, we have seen a reduction in electricity consumption at our production sites corresponding to 14% compared to 2021 and we will keep searching for new ways to reduce it even further. On our journey to use waste as a resource, we have in 2022 introduced new waste sorting bins in our oﬃce environment securing more comprehensive sorting and recycling going forward as well as maintaining our focus on ﬁnding new purposes for our production waste. At TCM Group manufacturing sites all waste is sorted in material fractions, which allows us to ensure that waste is used with the highest possible resource value. Our timber fraction is returned to our chipboard supplier and together with timber from Danish Recycling Center used for chipboard production. Timber from our worktop production of useable size ﬁnds new use as serving trays or is delivered to wood 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 waste water in that respect is carefully sorted and disposed in right manner. Electric company cars TCM Group operates a company car ﬂeet consisting of 20 mixed passenger cars and commercial vans. To reduce our impact, we have in 2022 introduced electric cars to our company car policy. Transition to electric cars will happen gradually and at the pace that follows the development of charging networks and the lead times for manufacturing and delivery of electric cars. We continuously monitor the technology, range, and infrastructure to support and promote the use of electric cars. workshops at local schools. In 2022 the distribution of waste was as illustrated below Based on tons waste. Svane Køkkenet INFINITY Leaf, REUSE 90.3% Recycle Case: From food waste to biofuel This summer we signed an agreement with DAKA ReFood on handling our food waste. The agreement with DAKA may only cover a small percentage of our total waste but it enables us to ensure that, yet another waste fraction ﬁnds new purposes. The collected food waste will be converted to either biofuel or used as part of plate materials. The collaboration was initiated in august 2022 and from august till year-end 1,958 tons of food waste from TCM factories was transformed into 77 days of energy for heating in a standard family home. 9.7% 9.6% Energy recovery 0.1% Hazardous waste Chairman and CEO’s report Financial Highlights Our business Corporate governance ESG Financial statements TCM Group Annual report 2022 33 limited to only supporting Svane kitchens. We will continue this journey to help our other brands and customers in the future. NEW WAYS Circular design Circular design is important because it helps to AHEAD create products and systems that are designed for sustainability. This can involve designing products that are made from renewable or recycled materials, that are durable and easy to repair or refurbish, and that can be reused, recycled, or repurposed at the end of their useful life. Circular design is really gaining momentum in TCM Group and in 2022 we have spent signiﬁcant resources on mapping input UN Global Compact principles: 12 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 accelerate our product development, we have included three focus areas in our current design and materials, and energy sources used for material processing and considering proper disassembly and possibilities in terms of recycling at a component level. This is yet another important step towards our ambition, that in 2025 all our new designs will be 100% circular. 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 daily thrive and a healthy indoor climate are both important factors. We constantly strive to positively impact the indoor environment via e.g., research and development within surface treatment and new materials. As a result of this, we have now phased out all acid-catalyzed varnish leading to reduced degassing, and included laminated tabletops in our range of certiﬁed products. We ensure valid and documented progress via third parties and external certiﬁcations. In 2022 we updated all external certiﬁcations and included all kitchen models in our range of certiﬁed products. 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 2021 we deﬁned a goal to ensure that all kitchen models produced from 2010 can be upgraded to extend their lifetime by 2023. We are happy to share that we have now met that goal. This enables all our kitchens produced in the last decade to stay relevant in the coming years. An example from 2022 is the launch of RE/DO under our brand Svane Køkkenet. The RE/DO concept enables us to actively help Svane customers upgrade their existing kitchens and it is not Svane Køkkenet INFINITY Leaf EVO edgeband Case: Infinity and EVO edge band When entering 2022, we set out to create a genuinely circular product, embracing as many details and materials as possible. Our research and development resources have worked all year to make this happen, and the result is our new product “INFINITY”. In “INFINITY” a minimum of 90% of the chipboard is made up of crushed industrial waste and waste from recycling stations and the remaining 10% from fast-growing trees. Both waste and chipboards are sourced and produced locally. Lastly, Inﬁnity is equipped with an EVO edge band a new type of PP ISSC-certiﬁed edge band with validated and certiﬁed recycled content (min. 50%). Inﬁnity is both a fully circular product that can be recycled repeatedly and an important step on our path to more fully circular product ranges. Indoor climate certificate # of certiﬁcate 8 % of Kitchen Lines covered by external validation 100% Chairman and CEO’s report Financial Highlights Our business Corporate governance ESG Financial statements TCM Group Annual report 2022 34 work with certiﬁed wood goes a long way back and the Group has been FSC® certiﬁed since 2010 but not for the entire product assortment. However, as timber is the primary material category of input to our production, it is very important to us to exclusively use timber from certiﬁed responsible sources. In addition to using a high level of recycled material. Together we Case: Engaging customers in sustainable forestry improve To engage the customers in our journey on sustainability the Nettoline brand initiated the RE:USE planting of trees for each kitchen sold in support of Danske Folkeskove (woods for citizens). The customers were invited to join a “day in the forest” when the trees were planted. Sometimes many little things add up to a lot and 2,350 trees have been planted in the woods of Rugballegaard, Lundager, and Greve. Our ESG mindset RE:DUCE In close collaboration with our suppliers, we have extended our certiﬁcation to cover our entire product portfolio and reached the target to make all the timber we buy FSC® or PEFC®-certiﬁed. Due to increased market volatility and low stock conversion rate for some components, we still have some non-certiﬁed material in our UN Global Compact principles: 1, 2, 3, 4, 5, 6, 7, 8, 9, 10 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. inventories. We are determined to phase out these components to meet our target of 100% certiﬁed timber in our production. RE:THINK Transport 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. In 2022 we initiated a measurement of our other indirect (Scope 3) GHG emissions (GRI standard 305-3) with a focus on our impact from downstream transportation and distribution. We have now successfully established a baseline and engaged in a dialogue on Transparency, valid data, and certiﬁcations are all crucial instruments to improve the performance of ESG parameters across our value chain. Besides supplier management in general we focus, in line with most material issues, on sustainable forestry, transport, and packaging. electriﬁcation and alternative fuels with one of our larger carriers. As a result of this, we have decided to carry out a more 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. Responsible forestry The world continues to face an increasing 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 Packaging material Our target on the packaging is that all material is recyclable by 2024. In 2022 we carried out a map- ping of our packaging material to get a more valid and holistic overview of the current situation of the recyclability of packaging. The initial analysis is promising and indicates an already high pro- responsible wood that we can have the greatest impact on biodiversity in TCM Group. TCM Group's Chairman and CEO’s report Financial Highlights Our business Corporate governance ESG Financial statements TCM Group Annual report 2022 35 portion of recycled content across our packaging. Another focus of our analysis is the “right” pack- aging volume. Here the focus is to hit the right bal- ance between reducing the amount of packaging without jeopardizing that the product becomes damaged under transport. We expect to identify areas for optimizing the balance and thereby applying less packaging in the future than today. United Nations Universal Declaration of Human Rights and the UN Global Compact. The backbone of our work with suppliers on ESG matters is our Code of Conduct. The total share of TCM Group’s purchasing, covered by our Code-of-Conduct was 100% in 2022 which also covers all suppliers from non-EU countries. However, we are currently revising the Code of Conduct to ensure, among other things, an even higher strategic ﬁt with our ESG strategy and an increased focus on human rights. 91% of all production of direct materials and components to our production is made in Europe. Supplier management Our' responsible sourcing practices are focused on environmental, social, and governance issues across our value chain. TCM Group is committed to respecting human rights as outlined in the We have an ongoing dialogue with our suppliers about sustainability, ESG matters and human right, something that we intended to continue in 2023. In 2022, we have extended the focus on screening sub-suppliers e.g. suppliers of tabletops, mirrors, etc. based on the demands and provisions in the buildings certiﬁcations DGNB and the Nordic Ecolabel. Production country Sweden of raw materials and components 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 2022, 91% of materials directly used in our production are made in Europe, of which 54% originate from Denmark or our neighboring countries (DK, DE, SE). 3% * based on total Denmark purchasing spend 23% Anti-corruption Netherlands TCM Group is exposed to the risk of non- 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 2022. In 2o23 we will continue our work with promoting anti-corruption in all our business relations. 3% Austria Germany 16% 28% Europa others 6% Asia Italy Svane Køkkenet NORDIC Eg CRAFT handle 9% 12% Chairman and CEO’s report Financial Highlights Our business Corporate governance ESG Financial statements TCM Group Annual report 2022 36 Diversity Policy Incentive pay TCM Group before 2025 falls within the reporting During 2022 we have formed a diversity and inclusion policy. The policy is available on TCM Group homepage. In 2021 and 2022 ESG performance-related criteria with a target of a signiﬁcant carbon emission reduction have been included in the long-term incentive program for TCM Group’s executive management. requirements according to the Corporate Sustainability Reporting Directive (CSRD). Governance Organizing ESG TCM Group will continue to develop and optimize internal processes to ensure alignment to EU Taxonomy. Eﬀective organization and management of ESG are essential to ensure steady progress on our ambitions and targets and to maintain and devel- op ESG as an integrated part of our way of doing business. TCM Group has deﬁned an ESG Steering Committee that is organized about our strategic focus areas and with the involvement of the rel- evant stakeholders. It consists of the CFO, Head of Assortment, 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 improvements, and convenes monthly. Gender Diversity on the Board of directors and among other executives 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. Tax Residence TCM Group A/S operates in Denmark and Norway, is listed on the Copenhagen Stock Exchange (Nasdaq MIDCAP Copenhagen), and pays taxes locally in Denmark and Norway. In 2022 TCM Group paid 39.1 mio. kr. in tax. 99.6% in Denmark and 0.4% in Norway. Our tax policy is available at the TCM Group homepage. Whistleblower system 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. 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 sexes are represented and where all members are independent. 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. 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 inquires regarding information on speciﬁc orders. TCM Group primarily uses the collected data in connection with order processesing, ie. 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. All TCM Group employees, customers, suppliers, advisors, and other individuals with a connection to the company 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. The sustainability 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 operation and ensure progress in each of the strategic focus areas. For the board elected by the general meeting, TCM Group wants a representation of the underrepresented gender of at least 40%. With a distribution of 1 woman and 5 men of the 6 members elected by the general meeting in 2022, we did not meet our target and cf. the Danish Business Authority's deﬁnition, we do not have an equal gender distribution on the board. Within the coming 4 years and no later than 2026, TCM Group seeks to gradually change towards the target set for the gender balance of the board of directors. TCM Group Whistleblower system can be access here. Organizational, the Sustainability manager is placed with the assortment team, a department that is involved with the decision-making around TCM product assortment throughout the value chain. To remove potential barriers to reporting TCM Group has in 2022 upgraded the reporting platform, to make sure that the process is as intuitive as possible, and expanded the number of local languages to make sure that it is possible for everyone who may have concerns to report in their local languages. To increase our eﬀorts and integration of ESG even more we aim to integrate ESG oversight as part of the responsibilities of the audit committee in 2023. Internally the reporting platform has been promoted to make sure that employees at TCM Group know that there is an anonymous platform available. EU taxonomy In 2021 TCM Group reported on EU Taxonomy eligible turnover, OpEx and CapEx as required by the EU Relgulation (EU 2020/852, article 8, the "EU Taxonomy"). The EU regulation applies to listed companies with more than 500 employees. In 2022 TCM Group had less than 500 employees and therefore did not fulﬁl the requirement of entities in scope of the Regulation. TCM Group will reassume Taxonomy reporting by 2025 or if In 2022 there has been no reported cases Board of Directors Audit Committee 0 ESG steering Committee We take responsibility New ways ahead Together we improve Sustainable work life Governance Chairman and CEO’s report Financial Highlights Our business Corporate governance ESG Financial statements TCM Group Annual report 2022 37 ESG performance 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. ESG Key figures The ESG data collection and reporting support our business to direct action plans and it provides transparency for all stakeholders in our sustainability work. Reference standard UNGC Principles Reference Accounting practices unit 2022 2021 2020 allignment report page Climate and environment Environment principles 7, 8, 9 CO -emissions 2 GRI 305 Emissions page 31 CO e, Scope 1 [ton] 2 tCO e 2 1,032 184 836 12 1,299 174.5 1,077.5 47 1,435 210 Vehicles Natural gas Others tC02e tC02e tC02e 1,191 34 CO e, Scope 2 [ton] 2 tCO e 2 892 888 4 1,041 1,035 6 1,703 1,698 5 Electric power District heating tC02e tC02e CO , total Scope 1+2 2 tCO e 2 1,924 1.7 2,340 2.1 3,138 3.1 CO2-e intensity (revenue) ratio Emission per 1m DKK net revenue /ton C02e Energy page 31, 32 Energy consumption MWh 7,294.3 8,490.8 8,749.9 12.8 Standard energy market mix in Denmark, Environmental product Renewable energy % 82 82 declaration ENERGINET per 1st of June 2021 Electricity consumption/revenue ratio 6.4 7.7 Electricity consumption (kWh) / net revenue (kDKK) Resources Water Water consumption m³ 5,899.86 Waste ton % 4,409.98 6,184.4 92.1 7.3 4,414.62 96.9 2.3 GRI 306-5 Waste page 32 Recycling 90.3 9.6 0 Energy recovery Landﬁll % % 0 0 Hazardous waste % 0.1 0.6 0.8 * In 2021 there has been made an registration error of the amount of waste generated. This has lead to an update of the values and distribution of the waste generated in 2021 in 2022 Chairman and CEO’s report Financial Highlights Our business Corporate governance ESG Financial statements TCM Group Annual report 2022 38 Reference standard UNGC Principles Reference Accounting practices (esg Key figures Continued) unit 2022 2021 2020 allignment report page Social data Diversity Labour 3, 4, 5, 6 page 29, 30 Number of full-time employees. Calculated excluding temporary and short-term employments Full-time employees, end of the period Blue collar workers # FTE % 482 23% 77% 504 483 % of total FTEs % of total FTEs White collar workers % Number of employees on ﬂex job contracts or similar by the end of the ﬁnansial year Flex jobs etc. # # 5 Number of employees on trainee contracts by the end of the Trainee, interns, apprentices 6 13 16 ﬁnansial year GRI 404 Diversity and Gender diversity overall % 36 32 29 Equal Opportunity All TCM Group employees Gender diversity, other management levels 4 of 14 (28%) 3 of 14 (21%) 4 of 15 (27%) Management (executive mgmt. and mgmt group), m/f Pay gap between genders, white collar 1.18 Average pay, white collar m/f (minus executive management) Occupational health and safety Labour 3, 4, 5, 6 page 29, 30 Sickness related absence (excl. absence due to sick children and maternity leave) Absence ratio related to sickness in 2021 Sickdays caused by work accidents Absence ratio related to work accidents % # 4.38 47 3.3 21 2.9 34 Absence related to work accidents (number of days) % 0.1 0.006 0.03 Total number of working hours/absence related to work accidents Number of Near-miss work accidents registered during the Near-miss work accident registrations Employee engagement score # (5-point scale) % 937 - 896 4.2 92 1,159 ﬁnancial year Engagement score based on a 5-point scale. Performed every second year (next time year 2023) - - % of employees that have participated in the engagement survey Engagement survey participation - Performed every second year (next time year 2023) Chairman and CEO’s report Financial Highlights Our business Corporate governance ESG Financial statements TCM Group Annual report 2022 39 Reference standard UNGC Principles Reference Accounting practices (esg Key figures Continued) unit 2022 2021 2020 allignment report page Governance Composition of the board of directors Members of the board of directors # # 6 5 5 8 page 20 -22 page 20 TCMs board members at publication date Number of TCM board meetings held. Does not cover other board seminars or committees Board meetings 12 11 Board meeting attendance Number of board meetings attended relative to number of board meetings held. % 100% 100% 97.5% page 22 Gender diversity, board of directors # 1 of 6 17% 1 of 5 20% 1 of 5 20% page 29, 36 Distribution of women and men on TCM’ Board of Directors. % Percentage of independent board members Distribution of independent and non-independent board members % 100% 100% 100% page 22 Risk and regulation Anti-Corruption 10 page 34-36 Suppliers covered by CODE of CONDUCT, signed % # 100 0 100 0 100 0 Whistleblower reports to TCM falling within the correct use of the whistleblower scheme Whistleblower reports page 36 page 36 % of Whistleblower reports to TCM falling iwthin the correct use of the whistleblower scheme resolved Whistleblower cases resolved % 100 100 100 Remuneration Shares held by members of the board of directors Number of shares held by members of the Board of Directors as a percentage of the total number of shares 40,625 91,602 7.9 38,125 49,902 8.8 38,125 49,902 - page 22 page 23 page 30 Shares held by the executive management Number of shares held by members of the Executive Management as a percentage of the total number of shares. CEO total compensation relative to FTE average total compensation Based on average salary of an employee of TCM (excluding members of the Executive Management) Chairman and CEO’s report Financial Highlights Our business Corporate governance ESG Financial statements TCM Group Annual report 2022 40 Paris financial statements Chairman and CEO’s report Financial Highlights Our business Corporate Governance ESG Financial statements TCM Group Annual report 2022 41 Consolidated financial statements 42 42 43 44 44 45 65 Income statement Statement of comprehensive income Balance sheet as of 31 December Statement of changes in shareholders' equity Cash ﬂow statement Notes to the ﬁnancial statement Deﬁnitions Chairman and CEO’s report Financial Highlights Our business Corporate Governance ESG Financial statements TCM Group Annual report 2022 42 income statement statement of comprehensive income DKK’000 Note 2022 2021 DKK’000 Note 2022 2021 Revenue 3 1,146,052 (912,032) 234,020 (79,632) (50,975 (22) 1,108,274 (853,673) 254,601 (70,097 (46,749) 0 Net proﬁt for the year 70,493 110,709 Cost of goods sold 4, 5, 7 Gross proﬁt Other comprehensive income Items that may be reclassified subsequently to profit or loss Selling expenses 4, 5, 7 Administrative expenses Other operating income Operating proﬁt before non-recurring items Non-recurring items Operating proﬁt 4, 5, 6, 7 Value adjustments of currency hedges before tax Tax on value adjustments of currency hedges Other comprehensive income for the year Total comprehensive income for the year (1,137) 250 750 (165) 103,391 (6,478) 96,913 1,263 137,756 691 (887) 69,606 585 8 111,294 138,447 554 Share of proﬁt/loss in associated companies Financial income 9 9 441 338 Financial expenses (9,215 89,401 (18,909) 70,493 (3,600) 135,738 (25,029) 110,709 Proﬁt before tax Tax for the year 10 Net proﬁt for the year Earnings per share before dilution, DKK Earnings per share after dilution, DKK 19 19 7.77 7.75 11.55 11.54 Chairman and CEO’s report Financial Highlights Our business Corporate Governance ESG Financial statements TCM Group Annual report 2022 43 balance sheet as of 31 December balance sheet as of 31 December DKK’000 ASSETS Note 2022 2021 DKK’000 Note 2022 2021 SHAREHOLDERS’ EQUITY AND LIABILITIES Intangible assets Goodwill 11 369,796 171,961 14,081 914 369,796 171,961 4,561 Share capital 17, 19 17 1,000 (12,087) Brand Treasury shares (135,976) (29) (916) 432,718 0 Other intangible assets Reserve for cash ﬂow hedges Retained earnings 18 555,838 546,318 500,292 54,404 419,691 Tangible assets 12 Proposed dividend for the year Total shareholders’ equity 20 127,127 1,119 420,629 Land and buildings 85,101 11,774 Tangible assets under construction and prepayments Machinery and other technical equipment Equipment, tools, ﬁxtures and ﬁttings 42,542 8,875 53,393 25,060 48,813 483 42,524 6,622 Deferred tax 21 2, 22 2 53,692 27,825 15,189 1,132 Mortgage loans 179,664 146,021 Lease liabilities Financial assets Other liabilities 2 48,702 26,814 75,516 811,018 127,748 Investments in associated companies 13 47,439 8,524 Total long-term liabilities 97,838 Other ﬁnancial assets 15 2,766 200,329 11,973 0 55,963 748,302 Mortgage loans 2, 22 2, 22 2 2,804 160,701 11,222 2,985 Total non-current assets Inventories Bank loans Lease liabilities 41,075 28,647 10,980 80,702 Raw materials and consumables Products in progress Finished products 46,104 21,929 9,731 Prepayments from customers Trade payables 151,892 115 2 2 158,924 928 Liabilities to associated companies Current tax liabilities Other liabilities 3,564 51,211 421,849 970,227 14 77,764 0 Current receivables Trade receivables 52,227 389,792 907,321 40,984 30,200 0 23 28,235 31,505 6,395 Total short-term liabilities Total shareholders’ equity and liabilities Other receivables 15 Tax receivables 2,932 Prepaid expenses and accrued income 16 3,235 74,116 4,392 69,370 11,884 Cash and cash equivalents Total current assets Total assets 159,209 970,227 159,019 907,321 Chairman and CEO’s report Financial Highlights Our business Corporate Governance ESG Financial statements TCM Group Annual report 2022 44 statement of Changes in shareholders’ equity cash flow statement reserve for DKK’000 Note 2022 2021 Share Treasury shares cash flow hedges Retained earnings Proposed Operating activities Operating proﬁt Depreciation/amortization Other non-cash operating items Income tax paid DKK’000 capital dividend Total 96,913 17,951 138,447 16,918 Opening balance 01.01.2022 2,113 (17,342) (25,899) (29,508) (13,944) 5,132 1,000 (135,976) (29) 500,292 54,404 419,691 (8,933) (2,938) (21,479) (11,451) 72,177 Net proﬁt for the year 0 0 0 70,493 0 70,493 Change in inventories Other comprehensive income for the year Change in operating receivables Change in operating liabilities Cash ﬂow from operating activities 0 0 (887) 0 0 (887) 73,804 Total comprehensive income for the year 0 0 (887) 70,493 0 69,606 Investing activities Investments in tangible assets Dividend paid 0 0 0 0 (54,404) (54,404) (22,593) (10,116) 10 (29,168) (4,466) (308) Investments in intangible assets Share based incentive program 0 0 0 (14,368) 138,257 (12,087) 0 0 104 0 0 0 0 0 104 (14,368) 0 Investments in ﬁnancial assets Acquisition of operations (associated company) Divestments of operations 24 (2,180) 0 (23,200) 4,600 Purchase of treasury shares Cash ﬂow from investing activities Operating cash ﬂow before acquisitions of operations Operating cash ﬂow after acquisitions of operations (34,879) 39,478 37,298 (52,542) 44,462 21,262 Reduction of share capital (86) 914 0 (138,171) 432,718 Closing balance 31.12.2022 (916) 420,629 Financing activities Interest paid (8,774) 39,628 (2,897) 140,701 Opening balance 01.01.2021 Proceeds from loans 25 25 25 1,000 0 (614) 443,987 130,000 574,373 Repayments of loans (2,805) (4,068) (14,368) (54,404) (44,790 (7,492) (2,823) Net proﬁt for the Repayments of lease liabilities Purchase of treasury shares Dividend paid (4,237) year 0 0 0 0 56,305 54,404 110,709 (135,976) (130,000) (135,232) (113,971) Other comprehensive income for the year 0 585 0 0 585 Cash ﬂow from ﬁnancing activities Cash ﬂow for the year Total comprehensive income for the year 0 0 585 56,305 54,404 111,294 Cash and cash equivalents at the beginning of the year Divestments of operations 11,884 0 131,683 (5,828 (113,971) 11,884 Dividend paid 0 0 0 0 (130,000) (130,000) Purchase of treasury shares Cash ﬂow for the year (7,492) 4,392 0 (135,976) 0 0 0 (135,976) Cash and cash equivalents at year-end Closing balance 31.12.2021 1,000 (135,976) (29) 500,292 54,404 419,691 Specification: Cach and cach equivalents at year-end 4,392 11,884 Chairman and CEO’s report Financial Highlights Our business Corporate Governance ESG Financial statements TCM Group Annual report 2022 45 notes to the consolidated financial statements 1. 2. Accounting policies..............................................................................................................................................................................46 Financial risks.........................................................................................................................................................................................51 Revenue and segment information ................................................................................................................................................ 53 Staﬀ costs................................................................................................................................................................................................ 53 Average number of employees during the period......................................................................................................................54 Audit fee...................................................................................................................................................................................................54 Depreciation/amortization and impairment by function....................................................................................................... 55 Non-recurring items........................................................................................................................................................................... 55 Financial income and expenses....................................................................................................................................................... 55 Corporation tax .....................................................................................................................................................................................56 Intangible assets...................................................................................................................................................................................56 Tangible assets...................................................................................................................................................................................... 57 Investments in associated companies...........................................................................................................................................59 Inventories..............................................................................................................................................................................................59 Other ﬁnancial assets and other receivables...............................................................................................................................59 Prepaid expenses and accrued income..........................................................................................................................................60 Share capital...........................................................................................................................................................................................60 Value adjustments of cash-ﬂow hedges.......................................................................................................................................60 Earnings per share ............................................................................................................................................................................... 61 Dividend................................................................................................................................................................................................... 61 Deferred tax............................................................................................................................................................................................ 61 Bank loans and mortgage loans.......................................................................................................................................................62 Financial assets and liabilities .........................................................................................................................................................62 Acquisition of operations...................................................................................................................................................................63 Changes in liabilities attributable to the ﬁnancing activities................................................................................................63 Pledged assets, contingent liabilities and commitments .......................................................................................................64 Related party transactions ................................................................................................................................................................64 Events after the balance sheet date................................................................................................................................................64 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. Chairman and CEO’s report Financial Highlights Our business Corporate Governance ESG Financial statements TCM Group Annual report 2022 46 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 the International Financial Reporting Standards as adopted by the EU (“IFRS”) and additional requirements of the Danish Financial Statements Act. Accounting policies are unchanged compared to last year. General principles Assets and liabilities are recognised at historic acquisi- tion value (cost), except for certain ﬁnancial assets and liabilities and ﬁxed assets held for sale. Financial assets and liabilities measured at fair value comprise derivative instruments. Fixed 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. expected cash ﬂows and the discount rate in the form of weighted average cost of capital are described in note 11, Intangible assets. The borrowing rate is set at the transition date for IFRS 16. If the company considers that a change in the resid- ual value guarantee, 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. Signiﬁcant accounting estimates and judgements related to IFRS 16 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. For both pro- duction buildings and retail leases, the lease term is estimated to be 5 years. Retail leases are in most 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 ‘Other receiveables’ in the balance sheet. Incremental borrowing rate The company has chosen to subdivide their leases into the following categories: • Rental contracts for premises • Vehicles Reporting under the ESEF Regulation The Commission Delegated Regulation (EU) 2019/815 on the European Single Electronic Format (ESEF Regula- tion) requires the use of a particular electronic reporting format for annual reports of listed companies in the EU. More speciﬁcally, 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 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-2022-12-31-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. 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. Significant accounting estimates and judgements Preparing the consolidated ﬁnancial statements in accordance with IFRS requires that Management makes assessments, estimates and assumptions that aﬀect the application of accounting policies and the recognized amounts of assets, liabilities, income and expenses. The actual outcome may diﬀer from these estimates and assessments. Estimates 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 cur- rent periods and future periods. Assessments made by Management in the application of IFRS that have a material impact on the consolidated ﬁnancial state- ments and estimates made that may lead to signiﬁcant adjustments in the consolidated ﬁnancial statements of future ﬁnancial years are primarily the following: 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 closing date. Other liabilities comprise short-term liabilities. 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 Chairman and CEO’s report Financial Highlights Our business Corporate Governance ESG Financial statements TCM Group Annual report 2022 47 Notes to the consolidated financial statements (continued) 1. Accounting policies (continued) 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. Goodwill in business combinations is calculated as the total of the consideration transferred, any non-con- trolling interests and fair value of previously owned participations (for step acquisitions) less the fair value of the subsidiary’s identiﬁable assets and assumed lia- bilities. When the diﬀerence is negative, it is recognized 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. A/S has only one operating segment that is producing and selling kitchens, bathrooms and storage. costs and other costs related to sales and marketing. Administrative expenses include staﬀ costs and other costs related to administration. 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. 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. 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. 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, transportation costs and indirect costs related to manufacturing such as sal- aries, rental and maintenance costs as well as deprecia- tion of production facilities. Non-recurring items Non-recurring items are used 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. Furthermore, non-recurring items include costs related to transactions costs related to business combinations, costs related to integration of a new business as well as costs related to Covid-19 precautions and related supply chain disruptions. Such costs are non-recurring in nature. 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. Tax Tax costs for the year comprise current tax and deferred tax. Income taxes are recognized in proﬁt or loss except when the underlying transaction is recognized in other comprehensive income or in shareholders’ equity, whereby the associated tax eﬀects are recognized in other comprehensive income or in shareholders’ equity. 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. 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 in proﬁt or loss as incurred. 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 Operating expenses (Selling and administrative expenses) Operating expenses primarily comprise selling and administrative expenses. Selling expenses include staﬀ Chairman and CEO’s report Financial Highlights Our business Corporate Governance ESG Financial statements TCM Group Annual report 2022 48 Notes to the consolidated financial statements (continued) 1. Accounting policies (continued) Deferred tax is calculated according to the balance-sheet method on all temporary diﬀerences arising between rec- ognized 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 rec- ognized, the diﬀerences will aﬀect current tax and deferred tax in the period in which these calculations are made. Buildings 36–40 years Machinery and other technical equipment 3-10 years Equipment, tools, ﬁxtures and ﬁttings 2-7 years Land is not depreciated. Expected useful lives and residual values are reviewed annually. 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 great 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 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 reasona- bly 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. 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 brand have an indeﬁnite 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 and brand are subject to impairment testing annually or if an indica- tion of an impairment requirement arises. The carrying amount comprises the cost less any accumulated impairment losses. A description of the method and assumptions applied when conducting impairment tests is found in note 11 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 takes place according to the straight-line method based on the estimated useful life of the asset (three to ﬁve years). 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 agree- ment contains 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 identi- ﬁable 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 recognized in the category of assets, which it belongs to. 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, the right-of-use asset is depreciated on a straight-line basis over the total expected useful life of the asset. 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 acquisi- tion. Costs for repairs, maintenance and any interest expenses 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 operating proﬁt. 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: Research and product development Costs for product development are expensed immedi- ately as and when they arise. Chairman and CEO’s report Financial Highlights Our business Corporate Governance ESG Financial statements TCM Group Annual report 2022 49 Notes to the consolidated financial statements (continued) 1. Accounting policies (continued) 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 compa- nies’ net asset value calculated in accordance with the Group’s accounting policy after elimination of the pro- portionate share of unrealized internal proﬁt/loss and with addition of value added on acquisition, including goodwill. Investments in associates are testet for impairment if an indication of an impairment requirement arises. 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 arises for the counterparty, even if an invoice has not been sent. Trade receivable are recognized in the balance sheet when revenue is recognized and an invoice has been sent. A liability is recognized when the counterparty has performed a service and a contractual payment obligation arises, even if an invoice has not been received. Accounts payable are recognized when a service 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. 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. 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. 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. Inventories Inventories comprise ﬁnished and semi-manufactured products and raw materials. Inventories are valued according to the ﬁrst-in, ﬁrst-out (FIFO) principle, at the lower of the cost and net sales value on the balance sheet date. The net sales value comprises the estimated sales price in the ongoing operations less selling expenses. Cost of ﬁnished and semi-manufactured products are measured at manufacturing cost including raw materials, direct labour, other direct expenses and production related overheads based on normal production. Inter-group proﬁts on inventory is eliminated in the consolidated ﬁnancial statements. 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. Financial instruments Financial instruments recognized in the balance sheet include cash and cash equivalents, loans receivable, trade receivable and derivative instruments on the asset side. On the liability side, there are accounts and cost payable, loan liabilities and derivative instruments. 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. 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- 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. 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 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 Chairman and CEO’s report Financial Highlights Our business Corporate Governance ESG Financial statements TCM Group Annual report 2022 50 Notes to the consolidated financial statements (continued) 1. Accounting policies (continued) 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). 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 amount 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 od 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. 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. 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. 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. 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. Chairman and CEO’s report Financial Highlights Our business Corporate Governance ESG Financial statements TCM Group Annual report 2022 51 Notes to the consolidated financial statements (continued) 2. Financial risks Foreign exchange risk TCM Group A/S has limited currency exposure and risk, entirely related to sales in NOK, where hedging in the range 70-100% of the net payments is applied. Other revenue was in DKK and purchases were primarily in DKK and EUR. Due to the current DKK-EUR ﬁxing, pur- chases were not hedged. Purchase in other currencies were DKK 4 million in 2022 (DKK 4 million). Credit risk TCM Group A/S’ customer base comprises both profes- sional customers and consumers. Credit management and payment terms are monitored for each customer group. The Group provides credit to professional cus- tomers whereas consumers usually do not get credit. Credit assessments are continuously performed on cus- tomers who make regular purchases. Credit insurance, bank guarantees and other collateral are utilized for the diﬀerent markets and customer categories. Changes in impairment of trade receivables in 2022 amounted to DKK 2.6 million and is recognized as an expence in the income statement 2022. Actual losses on debtors in 2022 and 2021 have been immaterial in relation to the size of the Group and its activities. Due to the market situation and a higher overdue amount, provisions for possible losses have been increased. The provision of DKK 3.6million consti- tutes 0.3% of net revenue for the year, which is consid- ered suﬃcient to cover future expected losses. at 31 December 2022 of DKK 2.2 million (DKK 1.8million). 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 2022. 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. Financial exposure The Group has signed a ﬁnance agreement with Nykredit Bank comprising a committed facility of DKK 300 million. The agreement initially includes a 3 year commitment plus an option to extend the facility with two 1-year extension options on similar terms, of whitch the Group has exercised the ﬁrst 1-year extension. The bank loans contain a leverage covenant of 4.0. There has been no breach of any covenant during the period. The interest rates on the bank loans are variable. Mortgage loans with a nominal amount of DKK 28 mil- lion (DKK 31 million) are amortised over 20 years and expire in 2032. The interest rates of mortgage loans are variable. 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. Age analysis, trade receivable 2022 2021 DKK’000 DKK’000 Trade receivables before impairment 44,602 29,296 Non-due trade receivable 32,209 22,411 Past due trade receivable 0-30 days 4,036 1,902 Past due trade receivable 30-90 days 2,335 1,015 Past due trade receivable >90 days 6,022 3,968 Total overdue 12,392 6,886 Of which secured 4,036 3,046 – Impaired 0 0 Of which unsecured 8,357 3,840 – Impaired (3,618) (1,061) Total overdue unsecured after impairment 4,739 2,779 Impairment loss recognized in the income statement during the period 861 25 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 instru- ments (level 1) • Quoted prices in an active market for similar assets or liabilities or other valuation methods where all signif- icant 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) 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. 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 Trade receivables as of 1 January 2021 amounted to DKK 24.4 million. Chairman and CEO’s report Financial Highlights Our business Corporate Governance ESG Financial statements TCM Group Annual report 2022 52 Notes to the consolidated financial statements (continued) 2. Financial risks (continued) Carrying amount of derivative financial instruments: 2022 2021 DKK’000 DKK’000 Hedging – currency ﬂuctuation (1,173) (37) (1,173) (37) Liquidity risk The company has an available facility up to DKK 300 million and until 31 March 2025, with an option to extend it to 31 March 2026. The facility has an unused amount of DKK 100 million at 31 december 2022 and futher DKK 4 million in liquidity. With budgeted num- bers for 2023 and further sensitivity of 10% in lower revenue and a sligth decrease in margin to budget, this will still be within the covenant in the agreement and with suﬃcient headroom in avaiable liquidity during 2023. 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 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 Nominal amount, 5 years functional 0-6 6-12 1-5 or DKK million currency months months years later Total 2021 Bank loans 160.7 1.0 1.0 163.3 0.0 165.4 Mortgage loans 30.6 1.5 1.5 11.9 17.5 32.4 Lease liabilities 26.4 5.8 5.7 15.3 0.0 26.8 Trade payables 158.9 158.9 0.0 0.0 0.0 158.9 Other liabilities 53.4 50.1 2.2 1.1 0.0 53.4 Financial and operational liabilities at 31 December 2021 217.3 10.4 191.7 17.5 436.9 During the ﬁnancial period, the Group had no ﬁnancial instruments in level 1 or 3. 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. Chairman and CEO’s report Financial Highlights Our business Corporate Governance ESG Financial statements TCM Group Annual report 2022 53 Notes to the consolidated financial statements (continued) 3. Revenue and segment information The Group’s business activities are managed within a single operating segment that is producing and selling kitchens, bathrooms and storage. Kitchens and related 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 2022 Board of Directors 2,375 0 0 34 0 2,409 6 Executive Management 4,642 317 48 648 398 6,053 2 Total 7,017 317 48 682 398 8,462 8 2021 Board of Directors 2,188 0 0 10 0 2,198 5 Executive Management 4,567 0 377 602 383 5,929 2 Total 6,755 0 377 612 383 8,127 7 2022 2021 Number of options As at 1 January 15,989 0 Granted during the year 17,427 15,989 Exercised during the year 0 0 Forfeited during the year (6,246) 0 As at 31 December 27,170 15,989 No options expired during the periods covered by the above tables. products cover products for kitchen. The result of the operating segment is monitored by the Group’s man- agement to evaluate it and to allocate resources. Revenue Intangible Revenue Intangible from and tangible from and tangible customers assets customers assets DKK’000 2022 2022 2021 2021 Geographic areas Denmark 1,032,496 735,502 1,011,380 692,339 Other countries 113,556 0 96,894 0 1,146,052 735,502 1,108,274 692,339 Revenue consists of sale of goods and services. 4. Staff Costs Total costs for employee benefits DKK’000 2022 2021 Salaries and other remuneration 216,535 206,347 Social security costs 5,736 5,806 Pension costs – deﬁned contribution plans 17,356 25,328 Other staﬀ costs 445 210 Total costs for employees 240,072 237,691 The average number of employees and number of men and women among Board members and Executive Management are described in note 5. Chairman and CEO’s report Financial Highlights Our business Corporate Governance ESG Financial statements TCM Group Annual report 2022 54 Notes to the consolidated financial statements (continued) The LTI program is entirely granted to Executive Man- agement and consists of annually commencing individ- ual Performance Share Unit Plans with rolling three- year performance periods for the periods 2021-2023 and 2022-2024. When the LTI program is granted to the participants, a maximum of 50% of the annual basic salary is converted to a maximum number of perfor- mance 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 accumulative 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. 4. Staff Costs (continued) 2022 2021 Share options outstanding at the of the year have the following expiry dates: 31 March 2024 9,743 15,989 31 March 2025 17,427 0 Total 27,170 15,989 Weighted average remaining contractual life of options outstanding at end of the period 1.89 2.25 Estimated Estimated exercise exercise DKK’000 2022 ratio 2021 ratio Fair value at 31 December: Granted in 2021 483 35% 1,132 50% Granted in 2022 312 28% 0 n.a. Total 795 32% 1,132 50% 5. Average number of employees during the period 2022 2021 Average number of employees 496 504 Board members 6 5 Of which women 1 1 Executive Management 2 2 Of which women 0 0 The Board of Directors consists of 6 members in total at the date of approval of these consolidated ﬁnancial statements. 6. 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 2022 2021 Specification by type of costs Statutory audit 675 0 Other assurance engagements 0 0 Tax and indirect taxes advisory 0 0 Other services 0 0 675 0 The fee for non-audit services delivered by PricewaterhouseCoopers Statsautoriseret Revisionspartnerselskab to the Company amounted to DKK 0.0 million in 2022. In addition to statutory audit, the former auditors appointed at the Annual General Meeting, Deloitte Statsautoriseret Revisionspartnerselskab, provided other assurance engagements and other services to the Group. 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: 65) Employees including the Board of Directors and Execu- tive Management have the opportunity to buy kitchens, bathrooms and storage at a discounted price. The pur- chases are done indirectly through an independent store. The total value of the purchases made by the Board of Directors and Executive Management was DKK 34 thousand (DKK 2 thousand) during the year. The remuneration report for the Board of Directors and the Executive Management is available on TCM Group´s website. Executive Management Executive Management, which in 2022 in average totals 2 individuals, received salaries and beneﬁts during the ﬁscal year amounting to DKK 4.6 million plus variable remuneration and other beneﬁts amounting to a total salary for 2022 of DKK 5.5 million. In addition to basic salary, Executive Management has a Short-term Incentive program (STI) and a Long-term Incentive program (LTI) which is governed by the Remuneration policy. The STI for 2022 is capped at 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. Board of Directors Remuneration to members of the Board of Directors is determined by resolutions taken at the Annual General Meeting. Chairman and CEO’s report Financial Highlights Our business Corporate Governance ESG Financial statements TCM Group Annual report 2022 55 Notes to the consolidated financial statements (continued) 6. Audit fee (continued) Below is how the income statement (extract) would have been presented if there were not adjusted for non-recurring items: DKK’000 2022 2021 Revenue 1,146,052 1,108,274 Cost of goods sold (918,272) (869,583) Gross profit 227,780 238,691 Selling expenses (79,832) (71,675) Administrative expenses (52,075) (48,536) Other operating income 1,040 19,966 Operating proﬁt 96,913 138,447 DKK’000 2022 2021 Specification by type of costs Statutory audit 0 595 Other assurance engagements 0 65 Tax and indirect taxes advisory 0 30 Other services 0 73 0 763 7. Depreciation/amortization and impairment by function Depreciation/ Depreciation/ amortization Impairment amortization Impairment DKK’000 2022 2022 2021 2021 Cost of goods sold 14,567 0 12,562 0 Selling expenses 964 0 1,060 0 Administrative expenses 2,421 0 3,296 0 Total depreciation/amortization and impairment 17,952 0 16,918 0 TCM Group presents non-recurring items separately to ensure comparability. Nonrecurring items consist of income and expenses that are special and of a non-re- curring nature. For 2022 non-recurring items consist of costs related to Covid-19 and supply chain disruptions, restructuring costs related to the restructuring of the store network in the Greater Copenhagen area as well as organisational restructuring carried out during 2022. The non-recurring costs are partly oﬀset by a non-re- curring gain from the ﬁnal earn-out from the Celebert/ kitchn.dk transaction. 9. Financial income and expenses DKK’000 2022 2021 Financial income Interest income on ﬁnancial assets measured at amortized costs 86 149 Interest income on discounted subleases 355 189 Financial expenses Interest expense on liabilities measured at amortized costs (8,493) (3,220) Interest expenses on discounted lease liabilities (722) (380) Total (8,774) (3,262) 8. Non-recurring items DKK’000 2022 2021 Costs related to Covid-19 and supply chain disruptions 5,440 14,010 Restructuring 4,658 1,300 Net gain from the Celebert/kitchn.dk transaction (3,620) (13,503) Gain from the divestment of an own operated store 0 (2,498) Total 6,478 (691) Chairman and CEO’s report Financial Highlights Our business Corporate Governance ESG Financial statements TCM Group Annual report 2022 56 Notes to the consolidated financial statements (continued) 10. 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 19,140 250 19,390 Change in deferred tax during the year (231) 0 (231) Total 18,909 250 19,159 Tax for the previus year can be specified as follows: Current tax 24,557 165 24,722 Change in deferred tax during the year 472 0 472 Total 25,029 165 25,194 Reconciliation of the eﬀective tax rate for the period can be speciﬁed as follows: DKK’000 % 2022 % 2021 Tax rate 22.0 19,668 22.0 29,816 Non-taxable income (0.3) (278) (3.3) (4,468) Non-deductible expenses 0.1 49 0.2 293 Other (0.6) (530) (0.5) (612) Eﬀective tax rate for the year 21.2 18,909 18.5 25,029 Non-taxable income primarily relates to result of associated companies. In 2021 non-taxable income includes techni- cal gains from divested activities. 11. Intangible assets DKK’000 2022 2021 Goodwill Opening carrying amount 369,796 369,796 Closing carrying amount 369,796 369,796 Brand Opening carrying amount 171,961 171,961 Closing carrying amount 171,961 171,961 Impairment testing of goodwill and brand At the end of 2022, recognized goodwill amounted to DKK 369.8 million (DKK 369.8 million) and recognized brand amounted to DKK 172.0 million (DKK 172.0 million). Goodwill has been allocated to cash generating unit (CGU) when the unit were acquired. TCM Group A/S has one CGU corresponding to the operating segment “Pro- ducing and selling kitchens, bathrooms and storage”, hence the acquired goodwill has been allocated here to. Goodwill is subject to an annual impairment test by cal- culating 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 starting 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 require- ments. Various economic indicators are used to analyse the business climate, as well as external and internal analyses of these. The assumptions are also based on the impact of the Group’s long-term strategic initiatives, comprising diﬀerentiated brands, a Group-wide range, central sourcing and product development. 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 assump- tion that all investors require at least the same level of return as for risk-free government bonds, with an addi- tional 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-spe- ciﬁc risk. The current tax rate of 22% is applied. Chairman and CEO’s report Financial Highlights Our business Corporate Governance ESG Financial statements TCM Group Annual report 2022 57 Notes to the consolidated financial statements (continued) 11. Intangible assets (continued) 12. Tangible assets Tangible Land and assets under Machinery Equipment, land construction and other tools, improve- and technical fixtures DKK’000 Buildings ments prepayments equipment and fittings Opening cost at 1 January 2022 94,971 6,988 11,773 56,020 15,247 Investments for the period 32,306 5,417 1,119 6,792 5,533 Transfer 8,988 0 (11,773) 2,786 0 Disposals for the period (350) 0 0 (10) (576) Closing cost amount at 31 December 2022 135,915 12,405 1,119 65,588 20,204 Opening depreciation and impairment at 1 January 2022 16,858 0 0 13,496 8,625 Disposals for the period (210) 0 0 (10) (547) Depreciation for the period 4,545 0 0 9,560 3,251 Closing depreciation and impairment at 31 December 2022 21,193 0 0 23,046 11,329 Closing carrying amount at 31 December 2022 114,722 12,405 1,119 42,542 8,875 Of which right-of-use assets Opening carrying amount at 1 January 2022 7,788 1,879 Investment for the period 26,847 1,623 Disposals for the period (350) (566) Depreciation for the period (2,284) (788) Closing carrying amount at 31 December 2022 32,001 2,148 In 2022, the Group’s weighted cost of capital before tax amounted to 12.3% (11.0%) and after tax 9.6% (8.6%). Brand 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, dis- counted 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 com- pared with the carrying amount. Testing of goodwill and brand did not lead to any impair- ment in 2022 or 2021. In management’s assessment, likely changes in the basic assumptions will not lead to the carrying amount exceeding the recoverable amount. Other intangible assets DKK’000 2022 2021 Opening cost 53,753 49,624 Investments for the period 10,116 4,465 Disposals for the period 0 (336) Closing accumulated cost 63,869 53,753 Opening amortization 49,192 47,927 Amortization for the period 596 1,400 Disposals for the period 0 (134) Closing accumulated amortization 49,788 49,193 Closing carrying amount Of which: Software and ERP platform 14,081 4,561 Closing carrying amount 14,081 4,561 Chairman and CEO’s report Financial Highlights Our business Corporate Governance ESG Financial statements TCM Group Annual report 2022 58 Notes to the consolidated financial statements (continued) Tangible Land and assets under Machinery Equipment, land construction and other tools, improve- and technical fixtures DKK’000 Buildings ments prepayments equipment and fittings Of which right-of-use assets Opening carrying amount at 1 January 2021 13,315 2,129 Investment for the period 0 1,832 Disposals for the period (3,118) (631) Depreciation for the period (2,410) (1,450) Closing carring amount at 31 December 2021 7,788 1,879 DKK’000 2021 Amounts recognized in the income statement Cost of short term leases 891 Variable leasing costs that are not included in leasing liabilities 152 1,043 No impairment was charged to tangible assets in 2022 or 2021. 12. Tangible assets (continued) DKK’000 2022 Amounts recognized in the income statement Cost of short term leases 1,256 Variable leasing costs that are not included in leasing liabilities 138 1,394 Tangible Land and assets under Machinery Equipment, land construction and other tools, improve- and technical fixtures DKK’000 Buildings ments prepayments equipment and fittings Opening cost at 1 January 2021 95,002 6,833 11,855 33,286 13,700 Investments for the period 5,023 155 11,575 11,326 4,273 Transfer 160 0 (11,657) 11,497 0 Disposals for the period (5,215) 0 0 (89) (2,726) Closing cost amount at 31 December 2021 94,971 6,988 11,773 56,020 15,247 Opening depreciation and impairment at 1 January 2021 14,722 0 0 5,590 7,112 Disposals for the period (2,097) 0 0 (89) (1,780) Depreciation for the period 4,232 0 0 7,994 3,292 Closing depreciation and impairment at 31 December 2021 16,858 0 0 13,496 8,625 Closing carrying amount at 31 December 2021 78,113 6,988 11,773 42,524 6,622 Chairman and CEO’s report Financial Highlights Our business Corporate Governance ESG Financial statements TCM Group Annual report 2022 59 Notes to the consolidated financial statements (continued) 13. Investments in associated companies DKK’000 2022 2021 Cost at start of year 61,178 0 Additions 0 61,178 Carrying amount at end of year 61,178 61,178 Value adjustments at start of year (13,740) 0 Elimination of internal proﬁt 0 (14,292) Share of proﬁt/(loss) 1,263 554 Value adjustments at end of year (12,477) (13,740) Carrying amount as at end of year 48,702 47,439 The associated company Celebert ApS sells kitchens online and has balance sheet date as at 30th of June. As of 30 June 2022 Celebert Aps had a gross proﬁt on DKK 14 million and a net proﬁt on DKK 3 million. As of 30 june 2022 assets in Celebert ApS. amounted to DKK 42 million of which DKK 11 million was current assets. As of 30 June 2022 short-term liabilities amounted to DKK 7 million. At the end of 2022, recognized goodwill related to associated companies amounted to DKK 45.6 million (DKK 45.6 mil- lion). No impairment was charged to goodwill related to associated companies in 2022 and 2021. 15. Other financial assets and other receivables DKK’000 2022 2021 Other financial assets Subleases 16,394 7,559 Receivables falling due in 12 month or later 9,450 0 Deposits 970 965 Total 26,814 8,524 Other receivables Subleases 8,312 7,120 Other receivables 21,888 24,384 Total 30,200 31,505 Subleases are speciﬁed as follows: 2022 2021 Undiscounted Undiscounted DKK’000 Book value value Book value value Falling due for payment within one year 8,312 8,521 7,120 7,234 Falling due for payment within one and two years 5,173 5,314 7,337 7,379 Falling due for payment within two and three years 5,332 5,420 222 222 Falling due for payment within three and four years 5,495 5,528 0 0 Falling due for payment within four and ﬁve years 396 397 0 0 Falling due for payment later 0 0 0 0 Total 24,708 25,180 14,679 14,836 Subleases falling due for payment later than one year is presented as ﬁnansial assets. Subleases falling due for payment within one year are presented as other receivables, but are not included in the calculation of net working capital. 14. Inventories DKK’000 2022 2021 Raw materials and consumables 41,075 46,104 Products in progress 29,647 22,929 Finished products 11,180 9,931 Total write-down of inventories (1,200) (1,200) 80,702 77,764 Costs of goods sold recognized as an expense during the period are DKK 912.0 million (DKK 853.7 million) and write downs of inventory recognized as an income oﬀ-setting scrapped inventory during the period are DKK 0.0 million (income of DKK 0.2 million). Chairman and CEO’s report Financial Highlights Our business Corporate Governance ESG Financial statements TCM Group Annual report 2022 60 Notes to the consolidated financial statements (continued) 16. Prepaid expenses and accrued income DKK’000 2022 2021 Other prepaid expenses 2,932 3,235 Total 2,932 3,235 18. Value adjustments of currency hedges Value Value adjustment adjustment of cash flow Total of cash flow Total DKK’000 hedges 2022 2022 hedges 2021 2021 Opening balance (29) (29) (614) (614) Value adjustments of currency hedges before tax (1,137) (1,137) 750 750 Tax on value adjustments of currency hedges 250 250 (165) (165) Closing balance (916) (916) (29) (29) 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. 17. Share capital No. of No. of registered shares Share capital shares outstanding Nominal value 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 As of 1 January 2021 10,000,000 10,000,000 1,000,000 As of 31 December 2021 10,000,000 10,000,000 1,000,000 Share capital amounted to nominal DKK 914,229. 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. Purchares Treasury shares No. of shares Nominel value price % of shares 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 As of 1 January 2021 0 0 0 0 Purchase of treasury shares 832,227 83,223 135,976 8.3 As of 31 December 2021 832,227 83,223 135,976 8.3 Chairman and CEO’s report Financial Highlights Our business Corporate Governance ESG Financial statements TCM Group Annual report 2022 61 Notes to the consolidated financial statements (continued) 19. 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. 2022 2021 Proﬁt attributable to shareholders (DKK’000) 70,493 110,709 Weighted average number of outstanding ordinary shares before dilution 9,074,847 9,584,933 Earnings per share before dilution (DKK) 7.77 11.55 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 and 2022. Refer to note 4. If all the performance targets set for the ﬁrst plan, PSU 2021 – 2023 and 2022-2024, are fully achieved, the aggregate allocated maximum number of share units and, accordingly, shares to be awarded 27,170 shares (gross earning). 2022 2021 Weighted average number of outstanding ordinary shares 9,074,847 9,584,933 Employee share option scheme 17,427 7,995 Weighted average number of outstanding ordinary shares after dilution 9,092,274 9,592,928 Earnings per share after dilution (DKK) 7.75 11.54 21. Deferred tax Deferred tax Deferred tax DKK’000 assets liabilities Net Opening balance, 1 January 2022 0 53,692 53,692 Recognized in net proﬁt for the year 0 (299) (299) Closing balance, 31 December 2022 0 53,393 53,393 Opening balance, 1 January 2021 0 53,220 53,220 Recognized in net proﬁt for the year 0 472 472 Closing balance, 31 December 2021 0 53,692 53,692 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 2022 39,391 14,315 543 (179) (378) 53,692 Recognized in net proﬁt for the year 15 (487) (31) (299) 152 52 As of 31 December 2022 39,406 14,467 595 (666) (409) 53,393 As of 1 January 2021 39,336 13,544 972 (143) (489) 53,220 Recognized in net proﬁt for the year 55 771 -429 (36) 111 472 As of 31 December 2021 39,391 14,315 543 (179) (378) 53,692 Corporation tax-rate in Denmark for the year is 22.0%. There are no loss carryforwards. 20. Dividend The Board of Directors proposes to the Annual General Meeting that a mandate is provided to the Board of Directors with the option to distribute a dividend during the second half of 2023 of up to DKK 30 million. Chairman and CEO’s report Financial Highlights Our business Corporate Governance ESG Financial statements TCM Group Annual report 2022 62 Notes to the consolidated financial statements (continued) 23. Financial assets and liabilities (continued) 22. bank loans and mortgage loans DKK’000 2022 2021 Maturity structure Within 1 year 203,095 163,506 Between 1 and 5 years 11,028 11,049 Longer than 5 years 14,032 16,776 Total 228,155 191,332 Refer to note 2 for additional information regarding bank loans and mortgage loans. 2021 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 0 965 0 965 Trade receivable 0 28,235 0 28,235 Cash and cash equivalents 0 11,884 0 11,884 Total 0 41,084 0 41,084 Long-term interest-bearing liabilities 0 0 43,014 43,014 Current interest-bearing liabilities 0 0 174,727 174,727 Accounts payable 0 0 158,924 158,924 Long-term other liabilities 0 0 1,132 1,132 Short-term current other liabilities 37 0 52,187 52,224 Total 37 0 429,984 430,021 23. Financial assets and liabilities 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 Chairman and CEO’s report Financial Highlights Our business Corporate Governance ESG Financial statements TCM Group Annual report 2022 63 Notes to the consolidated financial statements (continued) 24. Acquisition of operations (associated companies) 2021: Acquisition 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. Cost related to the transaction amounted to DKK 4.0 million and are presented under non-recurring items for 2021. 2022: Final settlement of earn out amounted to DKK 2.2 million in 2022. DKK’000 Assets held for sale 29,000 Purchase price Merged activities 32,178 61,178 Equity value of acquired net assets – 45% (15,528) Goodwill before elimination 45,650 Elimination of internal proﬁt (14,292) Goodwill after elimination 31,358 Goodwill is attributable to future expected growth potential and expected synergies with the merger of our e-commerce activities in kitchn.dk with Celebert ApS. 25. Changes in liabilities attributable to the financing activities Mortgage Bank lease DKK’000 loans loans liabilities Total 30,629 160,701 26,411 217,741 Opening balance, 1 January 2022 Non-cash change 0 0 28,573 28,573 New lease liabilities 0 0 (158) (158) Terminated leases 0 0 10,028 10,028 Subleases settled directly from the franchisee 0 0 0 0 Amortization of borrowing costs 0 0 38,443 38,443 Financing cash ﬂows (2,805) 0 (4,068) (6,873) Repayment of loans 0 39,628 0 39,628 Changes in cash pool (2,805) 39,628 (4,068) 32,755 Closing balance, 31 December 2022 27,825 200,329 60,786 288,939 Chairman and CEO’s report Financial Highlights Our business Corporate Governance ESG Financial statements TCM Group Annual report 2022 64 Notes to the consolidated financial statements (continued) 26. Pledged assets, contingent liabilities and commitments 25. Changes in liabilities attributable to the financing activities (Continued) The Group has, in respect of it’s commitment to Nykredit, issued a pledge ban on the Group’ assets. For collateral for debt to mortgage lender, DKK 27.8 million (DKK 30.6 million), pledges have been given in land and buildings with a carrying amount as of 31 December 2022 amounting to DKK 95.1million (DKK 77.3 million). Guarantees related to AB92 - provisions of work and supplies within building and engineering – amount to a total of DKK 1.4 million (DKK 1.9 million). The Group has contingent liabilities pertaining to sub-contractor guarantees that arise in normal com- mercial operations. No signiﬁcant liabilities are expected to arise through these contingent liabilities. Other bank guarantees amount in total to DKK 0.3 mil- lion (DKK 0.3 million). Mortgage Bank lease DKK’000 loans loans liabilities Total 33,443 19,641 34,936 88,020 Opening balance, 1 January 2021 Non-cash change 0 0 3,184 3,184 New lease liabilities 0 0 (411) (411) Terminated leases 0 0 (7,061) (7,061) Subleases settled directly from the franchisee 9 359 0 368 Amortization of borrowing costs 9 359 (4,288) (3,920) Financing cash ﬂows (2,823) (20,000) (4,237) (27,060) Repayment of loans 0 160,701 0 160,701 Changes in cash pool (2,823) 140,701 (4,237) 133,641 Closing balance, 31 December 2021 30,630 160,701 26,411 217,741 27. Related party transactions Related parties with a controlling interest As at 31 December 2022, 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 4: Remuneration to Executive Management and Board of Directors. The Group has had transactions with the associated company Celebert ApS. Transactions related to sales amounted to DKK 20.2 million and transactions related to administration fees amounted to DKK 0.2 million. There are no other transactions with related parties. 28. Events after the balance sheet date Apart from the events recognized or disclosed in the annual report, no other events have occurred after the balance sheet date to this date which would inﬂuence the evaluation of this annual report. Chairman and CEO’s report Financial Highlights Our business Corporate Governance ESG Financial statements TCM Group Annual report 2022 65 Notes to the consolidated financial statements (continued) 29. Companies in the TCM group Business Share of registration no Domicile equity Parant company TCM Group A/S 37291269 Holstebro Subsidiaries TMK A/S 75924712 Holstebro 100% Nettoline A/S 31599555 Aulum 100% Associated companies Celebert ApS 27428959 Aalborg 45% Ratios: Calculation formula Ratio Gross proﬁt * 100 Gross margin Revenue EBITDA margin EBITDA * 100 Revenue Adjusted EBITDA * 100 Adjusted EBITDA margin Revenue Adjusted EBIT * 100 Adjusted EBIT margin Revenue EBIT margin EBIT * 100 Revenue Equity * 100 Solvency ratio Balance sheet total Leverage ratio Net interest-bearing debt excluding tax liabilities 12 months adjusted EBITDA Net working capital (1) * 100 NWC ratio 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 is calculated as adjusted EBITDA less the change in Cash conversion ratio 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 19 in the consolidated ﬁnancial statements. (1) Net working capital is adjusted with assets and liabilities held for sale. 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: Operating proﬁt before non-recurring items (Adjusted EBIT) plus Adjusted EBITDA: depreciation and amortization. Operating proﬁt before non-recurring items (Adjusted EBIT). Adjusted EBIT: Current and non-current interest-bearing loans and borrowings less Net interest-bearing debt: 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. Chairman and CEO’s report Financial Highlights Our business Corporate Governance ESG Financial statements TCM Group Annual report 2022 66 Financial statements of the parent company 67 67 68 69 69 Income statement and statement of comprehensive income Balance sheet as of 31 December Changes in shareholders’ equity Cash ﬂow statement Notes to the parent ﬁnancial statements Chairman and CEO’s report Financial Highlights Our business Corporate Governance ESG Financial statements TCM Group Annual report 2022 67 income statement and Statement of comprehensive income Balance sheet as of 31 December DKK’000 Note 2022 2021 DKK’000 Assets Note 2022 2021 Revenue 7,296 7,296 8,000 8,000 Gross proﬁt Non-current assets Administrative expenses Operating loss 2, 3 (11,179) (3,883) (12,130) (4,130) Investments in subsidiaries Financial non-current assets Total non-current assets 6 496,756 496,756 496,756 496,756 496,756 496,756 Dividend from subsidiaries Financial income 115,000 2,283 150,000 422 4 4 Current assets Financial expenses Proﬁt before tax (6,332) 107,068 (2,126) 144,166 Receivables from subsidiaries 111,641 80 24,832 0 Other receivables Deferred tax assets 66 0 Tax for the year 5 1,742 1,231 Tax receivables 0 6,395 2,273 33,500 Net proﬁt for the year 108,810 145,398 Prepaid expenses and accrued income Total current assets 1,556 113,343 Other comprehensive income Items that may be reclassiﬁed subsequently to proﬁt or loss Cash and cash equivalents Total current assets Total assets 0 113,343 610,099 12 33,511 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 0 530,267 108,810 145,398 Chairman and CEO’s report Financial Highlights Our business Corporate Governance ESG Financial statements TCM Group Annual report 2022 68 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 2022 2021 Opening balance 01.01.2022 1,000 (135,976) 444,421 54,404 363,849 Equity and liabilities Net proﬁt for the year 0 0 108,810 0 108,810 Share capital 914 (12,089) 415,164 0 1,000 (135,976) 444,421 54,404 Total comprehensive income for the year 0 0 0 0 108,810 0 0 108,810 (54,404) 104 Treasury shares Dividend paid (54,404) Retained earnings Proposed dividend for the ﬁnancial year Total equity Share based incentive program Purchase of treasury shares Reduction of share capital Closing balance 31.12.2022 0 0 104 0 0 0 0 0 (14,370) 138,257 (12,089) 0 (14,370) 0 403,989 363,849 (86) 914 (138,171) 415,164 403,989 Bank loans 7 7 0 587 587 0 1,132 1,132 Other payables Opening balance 01.01.2021 1,000 0 353,427 130,000 484,427 Total long-term liabilities Net proﬁt for the year 0 0 90,994 54,404 145,398 Total comprehensive income for the year Current liabilities Bank loans 0 0 0 0 90,994 54,404 (130,000) 0 145,398 (130,000) (135,976) 363,849 200,329 1,734 0 160,701 2,235 1,525 0 Dividend paid 0 0 Trade payables Purchase of treasury shares Closing balance 31.12.2021 0 (135,976) (135,976) Payables to subsidiaries Current tax liabilities Other payables 1,000 444,421 54,404 3,460 0 826 Total current liabilities Total liabilities 205,523 206,110 165,287 166,419 Total equity and liabilities 610,099 530,267 Chairman and CEO’s report Financial Highlights Our business Corporate Governance ESG Financial statements TCM Group Annual report 2022 69 Cash flow statement Notes to the parent financial statements 1. Significant accounting estimates and judgements DKK’000 NOTE 2022 2021 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 bal- ance 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. Subsidiaries are tested for impairment if events or other circumstances indicate that the carrying amount is not recoverable. Measuring subsidiaries requires signiﬁcant estimates to be made when making diﬀerent assump- tions, 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. Operating activities Operating loss (3,883) (15,326) (59,144) (3,464) (81,817) (4,130) (25,874) 4,629 Income tax paid Change in operating receivables Change in operating liabilities Cash ﬂow from operating activities (851) (26,226) Dividend received 115,000 150,000 Cash ﬂow from investing activities 115,000 150,000 Interest paid (4,049) 39,628 (1,344) 140,701 Proceeds and repayment of loans Purchase of treasury shares Dividend paid 8 (14,370) (54,404) (33,195) (135,976) (130,000) (126,619) Cash ﬂow from ﬁnancing activities Cash ﬂow for the year (12) (2,845) Cash at start of year Cash ﬂow for the year Cash at end of year 12 (12) 0 2,857 (2,845) 12 Chairman and CEO’s report Financial Highlights Our business Corporate Governance ESG Financial statements TCM Group Annual report 2022 70 Notes to the parent financial statements (continued) 2. STaff Costs 3. 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 2022 2021 DKK’000 2022 2021 Total costs for employee benefits Salaries and other remuneration 6,505 1 7,341 21 Specification by type of costs Statutory audit Social security costs 255 0 0 Pension costs – deﬁned contribution plans Total costs for employees 399 574 Other assurance engagements 0 6,905 7,936 255 0 Further employee beneﬁts for executive management a.o. company car, phone etc. are presented as administration costs. The fee for non-audit services delivered by PricewaterhouseCoopers Statsautoriseret Revisionspartnerselskab to the Com- pany amounted to DKK 0.0 million in 2022. Remuneration and other benefits In addition to statutory audit, the former auditors appointed at the Annual General Meeting, Deloitte Statsautoriseret Revi- sionspartnerselskab, provided other assurance engagements and other services to the Group. Variable re- Variable re- BasE salary, muneration, muneration, DKK’000 2022 2021 Directors cash based share based Other Pension costs Number of DKK’000 2022 fees (STI) (LTI) benefits Total individuals Specification by type of costs Statutory audit 0 0 0 185 65 Other assurance engagements Board of Directors 250 2,375 0 0 34 0 2,409 6 Executive Management 4,642 317 48 648 398 6,053 2 4. Financial income and expenses Total 7,017 317 48 682 398 8,462 8 DKK’000 2022 2021 2021 Financial income Board of Directors 2,188 0 0 10 0 2,198 5 Interest income from subsidiaries 2,283 422 Executive Management Financial expenses 4,567 0 377 602 383 5,929 2 Interest expense on liabilities measured at amortized costs (6,332) (2,125) Total 6,755 0 377 612 383 8,127 7 Total (4,049) (1,704) Refering to note 4 of the consolidated ﬁnancial statement for description of the Short-term Incentive program (STI) and Long-term Incentive program (LTI). Chairman and CEO’s report Financial Highlights Our business Corporate Governance ESG Financial statements TCM Group Annual report 2022 71 Notes to the parent financial statements (continued) 5. Corporation tax 6. Investments in subsidiaries Other Total comprehen- sive income DKK’000 2022 2021 Income comprehen- sive income DKK’000 statement Investments in subsidiaries Cost at start of year 496,756 496,756 496,756 496,756 496,756 496,756 Tax for the year can be speciﬁed as follows: Cost at end of year Current tax 1,742 0 1,742 Carrying amount at end of year Total 1,742 0 1,742 Investments in subsidiaries comprise: TMK A/S, 100% Tax for the previus year can be speciﬁed as follows: Current tax 1,231 0 1,231 Refer to note 29 of the consolidated ﬁnancial statements for a list of all companies in the TCM Group. Total 1,231 0 1,231 The carrying amount of the Parent’s investments in subsidiaries is tested for impairment if an indication of impair- Reconciliation of the eﬀective tax rate for the year can be speciﬁed as follows: ment exists. There has not been identiﬁed any indication of impairment. DKK’000 % 2022 % 2021 Tax rate 22.0 (23.6) 0.0 23,555 (25,300) 4 22.0 (22.9) 0.0 31,717 (33,000) 52 Non-taxable income Non-deductible expenses Eﬀective tax rate for the year (1.6) (1,741) (0.9) (1,231) Non-taxable income relates to dividend from subsidiaries. Chairman and CEO’s report Financial Highlights Our business Corporate Governance ESG Financial statements TCM Group Annual report 2022 72 Notes to the parent financial statements (continued) 7. Changes in liabilities attributable to the financing activities 8. Guarantees, contingent liabilities and collateral 10. Events after the balance sheet date DKK’000 Bank loans Total The Company has, in respect of the Group’s commit- ment to Nykredit, issued a pledge ban on all assets. Apart from the events recognized or disclosed in the annual report, no other events have occurred after the balance sheet date to this date which would inﬂuence the evaluation of this annual report. Opening balance, 1 January 2022 Non-cash change 160,701 160,701 TCM Group A/S is the management company in the Danish joint taxation. Consequently, refering to the Danish Corporation 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. Amortization of borrowing costs 0 0 11. Accounting policies 0 0 Financing cash ﬂows Repayment of loans Changes in cash pool 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. 0 39,628 39,628 0 39,628 39,628 9. Related parties Description of accounting policies applied Closing balance, 31 December 2022 200,329 200,329 For speciﬁcation of related parties refer to note 27 and 29 of the consolidated ﬁnancial statements. 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: Opening balance, 1 January 2021 Non-cash change 19,641 19,641 Referring to note 4 of the consolidated ﬁnancial state- ments: Remuneration to Executive Management and Board of Directors. Amortization of borrowing costs 359 359 Dividend income Distribution of proﬁts accumulated by subsidiaries is taken to income in the Parent’s income statement in the ﬁnan- cial year in which the dividend is recieved. 359 359 Management fee from subsidiaries in the ﬁnancial year Financing cash ﬂows Repayment of loans Changes in cash pool amounts to DKK 7.3 million (DKK 8.0 million). (20,000) 160,701 140,701 (20,000) 160,701 140,701 Intragroup transactions are carried out on arm’s length principles. 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. 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 160,701 160,701 Chairman and CEO’s report Financial Highlights Our business Corporate Governance ESG Financial statements TCM Group Annual report 2022 73 Notes to the parent financial statements (continued) Interest-rate risk Capital management 12. Financial risks It is group policy to fully or partially hedge interest rate 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. 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. Translation exposure The Company does not have any subsidiaries in foreign countries, why there is no translation exposure. 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 100 million (DKK 39 million) as of 31 December 2022. Credit risk 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 2022 of DKK 2.0 million (DKK 1.6 million). The Company does not have any external activities. No material credit risk have been identiﬁed. Financial exposure The Group has signed a ﬁnance agreement with Nykredit Bank comprising a committed facility of DKK 300 million. The agreement initially includes a 3 year commitment plus an option to extend the facility with two 1-year extension options on similar terms, of whitch the Group has exercised the ﬁrst 1-year extension. 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 2022. No adjustments have been made for instalments, raising of loans, etc. during the course of the year. The bank loans contain a leverage covenant of 4.0. There has been no breach of any covenant during the period. The interest rates on the bank loans are variable. The computed expected ﬂuctuations are based on the current market situation and expectations for the mar- ket developments in the interest rate level. Chairman and CEO’s report Financial Highlights Our business Corporate Governance ESG Financial statements TCM Group Annual report 2022 74 Statement by Management on the annual report Independent auditor's report The Board of Directors and the Executive Management have today considered and adopted the annual report for the ﬁnancial year 1 January 2022 – 31 December 2022. 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 2022 as well as of the results of their operations and the cash ﬂows for the period 1 January 2022 – 31 December 2022. 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 2022 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 2022 in accordance with International Financial Reporting 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 ﬁnancial 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 2022 with the ﬁle name TCM Group-2022-12-31-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 2022 comprise income statement and statement of comprehensive income, balance sheet, statement of changes in shareholders’ equity, cash ﬂow statement and notes, including summary of signiﬁcant accounting policies for the Group as well as for the Parent Company. Collectively referred to as the “Financial Statements”. Holstebro, 24 February 2023 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 Mogens Elbrønd Pedersen 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 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. Board of Directors Sanna Mari Suvanto-Harsaae Anders Tormod Skole-Sørensen 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 Carsten Bjerg Søren Mygind Eskildsen Jan Amtoft We were ﬁrst appointed auditors of TCM Group A/S on 5 April 2022 for the ﬁnancial year 2022. Danny Feltmann Espersen Chairman and CEO’s report Financial Highlights Our business Corporate Governance ESG Financial statements TCM Group Annual report 2022 75 Independent auditor’s report (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 2022. 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. Based on the work we have performed, in our view, Management’s Review is in accordance with the Consolidated Financial Statements and the Parent Company Financial Statements and has been prepared in accordance with the requirements of the Danish Financial Statements Act. We did not identify any material misstatement in Management’s Review. Key audit matter How our audit addressed the key audit matter Management’s responsibilities for the Financial Statements 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 International Financial Reporting Standards as adopted by the EU and further 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 considered the appropriateness of the accounting policies for assessing the recoverability of the carrying amount of goodwill and brand. Impairment test of goodwill and brand At 31 December 2022 the Group’s intangible assets amounts to DKK 555,838 thousand primarily related to goodwill of DKK 369,796 thousand and brand of DKK 171,961 thousand. Our audit procedures included assessment of the applied impairment model with focus on signiﬁcant assumptions in determination of future cash ﬂow, including growth rates for revenue, proﬁt margins and investment in the budget and forecast periods, as well as discount rate and royalty rate used. 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. Impairment tests related to goodwill and brand includes 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. We assessed sensitivity analysis performed by management to evaluate the impact of reasonable changes in key assumptions. 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. We focused on impairment tests related to goodwill and brand as accounting estimates 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 2022 with actual ﬁgures. We also assessed the appropriateness of the disclosures related to impairment tests. We refer to note 11 in the consolidated ﬁnancial statements. As part of an audit in accordance with ISAs and the additional requirements applicable in Denmark, we exercise pro- fessional judgement and maintain professional scepticism throughout the audit. We also: Statement on Management’s Review Management is responsible for Management’s Review. • 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. Our opinion on the Financial Statements does not cover Management’s Review, and we do not express any form of assurance conclusion thereon. 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. Moreover, we considered whether Management’s Review includes the disclosures required by the Danish Financial Statements Act. • 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. • • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by Management. 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 sig- Chairman and CEO’s report Financial Highlights Our business Corporate Governance ESG Financial statements TCM Group Annual report 2022 76 Independent auditor’s report (continued) niﬁcant 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. 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 judgement, 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: • • 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. 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. • • 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; 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. • • 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. • • 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. In our opinion, the annual report of TCM Group A/S for the ﬁnancial year 1 January to 31 December 2022 with the ﬁle name TCM-Group-2022-12-31-en.zip is prepared, in all material respects, in compliance with the ESEF Regulation. 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. Aarhus, 24 February 2023 PricewaterhouseCoopers Statsautoriseret Revisionspartnerselskab CVR no 3377 1231 Report on compliance with the ESEF Regulation 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 2022 with the ﬁlename TCM Group-2022-12- 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: Claus Lindholm Jacobsen State Authorised Public Accountant mne23328 Claus Lyngsø Sørensen State Authorised Public Accountant mne34539 • • 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 judge- ment where necessary; • Ensuring consistency between iXBRL tagged data and the Consolidated Financial Statements presented in human-readable format; and

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