TCM Group

TCM-GROUP - 2021 TCM Group A/SSkautrupvej167500Holstebro37291269529900P5DOKT3XLWL4802021-01-012021-12-312020-01-012020-12-31Corporate Governance | TCM Group A/SRegnskabsklasse DÅrsrapport37291269TCM Group A/SSkautrupvej 167500 HolstebroxWizard version 1.1.1097.1, by EasyX Aps. www.easyx.euRevisionspåtegningGrundlag for konklusionKonklusion33963556339635563396355633963556529900P5DOKT3XLWL4802021-01-012021-12-31529900P5DOKT3XLWL4802021-01-012021-12-31cmn:ConsolidatedMember529900P5DOKT3XLWL4802020-01-012020-12-31529900P5DOKT3XLWL4802021-12-31529900P5DOKT3XLWL4802020-12-31529900P5DOKT3XLWL4802020-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember529900P5DOKT3XLWL4802020-12-31ifrs-full:IssuedCapitalMember529900P5DOKT3XLWL4802020-12-31ifrs-full:TreasurySharesMember529900P5DOKT3XLWL4802020-12-31ifrs-full:RetainedEarningsMember529900P5DOKT3XLWL4802020-12-31tcm-group:DividendForTheYear529900P5DOKT3XLWL4802020-12-31ifrs-full:EquityAttributableToOwnersOfParentMember529900P5DOKT3XLWL4802021-01-012021-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember529900P5DOKT3XLWL4802021-01-012021-12-31ifrs-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:ReserveOfExchangeDifferencesOnTranslationMember529900P5DOKT3XLWL4802021-12-31ifrs-full:IssuedCapitalMember529900P5DOKT3XLWL4802021-12-31ifrs-full:TreasurySharesMember529900P5DOKT3XLWL4802021-12-31ifrs-full:RetainedEarningsMember529900P5DOKT3XLWL4802021-12-31tcm-group:DividendForTheYear529900P5DOKT3XLWL4802021-12-31ifrs-full:EquityAttributableToOwnersOfParentMember529900P5DOKT3XLWL4802019-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember529900P5DOKT3XLWL4802019-12-31ifrs-full:IssuedCapitalMember529900P5DOKT3XLWL4802019-12-31ifrs-full:TreasurySharesMember529900P5DOKT3XLWL4802019-12-31ifrs-full:RetainedEarningsMember529900P5DOKT3XLWL4802019-12-31tcm-group:DividendForTheYear529900P5DOKT3XLWL4802019-12-31ifrs-full:EquityAttributableToOwnersOfParentMember529900P5DOKT3XLWL4802020-01-012020-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember529900P5DOKT3XLWL4802020-01-012020-12-31ifrs-full:IssuedCapitalMember529900P5DOKT3XLWL4802020-01-012020-12-31ifrs-full:TreasurySharesMember529900P5DOKT3XLWL4802020-01-012020-12-31ifrs-full:RetainedEarningsMember529900P5DOKT3XLWL4802020-01-012020-12-31tcm-group:DividendForTheYear529900P5DOKT3XLWL4802020-01-012020-12-31ifrs-full:EquityAttributableToOwnersOfParentMember529900P5DOKT3XLWL4802020-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember529900P5DOKT3XLWL4802020-12-31ifrs-full:IssuedCapitalMember529900P5DOKT3XLWL4802020-12-31ifrs-full:TreasurySharesMember529900P5DOKT3XLWL4802020-12-31ifrs-full:RetainedEarningsMember529900P5DOKT3XLWL4802020-12-31tcm-group:DividendForTheYear529900P5DOKT3XLWL4802020-12-31ifrs-full:EquityAttributableToOwnersOfParentMember529900P5DOKT3XLWL4802020-12-31529900P5DOKT3XLWL4802019-12-31529900P5DOKT3XLWL4802021-01-012021-12-31cmn:ConsolidatedMember0529900P5DOKT3XLWL4802021-01-012021-12-31cmn:ConsolidatedMember1529900P5DOKT3XLWL4802021-01-012021-12-31cmn:ConsolidatedMember0529900P5DOKT3XLWL4802021-01-012021-12-31cmn:ConsolidatedMember1529900P5DOKT3XLWL4802021-01-012021-12-31cmn:ConsolidatedMember2529900P5DOKT3XLWL4802021-01-012021-12-31cmn:ConsolidatedMember3529900P5DOKT3XLWL4802021-01-012021-12-31cmn:ConsolidatedMember4529900P5DOKT3XLWL4802021-01-012021-12-31cmn:ConsolidatedMember0529900P5DOKT3XLWL4802021-01-012021-12-31cmn:ConsolidatedMember1529900P5DOKT3XLWL4802021-01-012021-12-31cmn:ConsolidatedMember2529900P5DOKT3XLWL4802021-01-012021-12-31cmn:ConsolidatedMember3iso4217:DKKiso4217:DKKxbrli:shares Annual report 2021 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 2021 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. Front page photo Tvis Køkkener M-line Momento Chairman and CEO’s report Financial Highlights Our business Corporate governance ESG Financial statements TCM Group Annual report 2021 3 About TCM Group TCM Group is Scandinavia’s third largest kitchen manufacturer, with headquarter in Denmark and selling though approximately 140 stores across Scandinavia. A major part of our business is concentrated in Denmark with Norway being the primary export market. The product range includes kitchen, bathroom and storage solutions. TCM Group pursues a multi-brand strategy, under which the main brand is Svane Køkkenet and the secondary brands are Tvis Køkkener, 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 and more than 90% is manufactured to speciﬁc customer orders. Production sites are located in Denmark, with three factories in Tvis and Aulum (in the western part of Denmark). TCM Group is listed on Nasdaq Copenhagen. 2 Nettoline Capri 1 Svane Køkkenet Nordic Natur Eg Chairman and CEO’s report Financial Highlights Our business Corporate governance ESG Financial statements TCM Group Annual report 2021 4 05 Chairman and 13 Our 26 ESG 27 28 29 31 Highlights 2021 Our value chain impact CEO’s report business 06 Letter to our shareholders 15 16 Strategy and ﬁnancial targets Danish design and Danish production Our ESG-strategy A sustainable worklife We take responsibility New ways ahead Together we improve Reporting according to EU-taxonomy 33 35 36 38 17 Risk management 07 Financial Highlights 19 CoRporate governance 08 Financial Highlights 09 Business review 20 Corporate governance 22 Board of Directors and Executive Management 10 11 Key ﬁgures and ratios Financial review 24 Shareholder information 39 financial statements 40 consolidated financial 65 Financial statements of the 73 Statement by Management on the annual report statements Parent company 41 41 Income statement Statement of comprehensive income 66 Income statement 66 Statement of comprehensive income 66 Balance sheet as of 31 December 73 Independent auditor’s repor 42 Balance sheet as of 31 December 43 Statement of changes in equity 43 Cash ﬂow statement 44 Notes to statement of cash ﬂows 64 Deﬁnitions 67 Changes in shareholders´s equity 68 Cash ﬂow statement 68 Notes to the parent ﬁnancial statements Chairman and CEO’s report Financial Highlights Our business Corporate governance ESG Financial statements TCM Group Annual report 2021 5 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. Chairman and CEO’s report S12 RAW Ltd. Chairman and CEO’s report Financial Highlights Our business Corporate governance ESG Financial statements TCM Group Annual report 2021 6 brands and believe that we can continue to gain market share in the Danish market as well as exploit the signiﬁcant potential outside Denmark with the focus in the Norwegian market. During Q1 and Q2 2022 we will add three new Svane Køkkenet stores to the Norwegian store network. a mandate is provided to the Board of Directors with the option to distribute an extraordinary dividend during 2022 in the range DKK 25-75 million. 2021 was in many ways an exceptional year. The shutdown following the pandemic a.o. led to a booming housing market and a home Letter to our Shareholders improvement and DIY trend that favourably supported the demand for kitchens in the Danish market especially in the ﬁrst quarters of 2021. For 2022 we expect a revenue in the range of DKK 1,150 to 1,225 million corresponding to an organic growth of 4-11%. The supply situation in the beginning of 2022 continues to be unstable, however we expect the situation to stabilize somewhat during the year, which will support an Adjusted EBIT in the range DKK 140 to 170 million. We are pleased with a double-digit organic like- for-like growth rate and that we passed a new revenue milestone of DKK 1.1 billion. Besides organic growth in a solid Danish kitchen market, we are also pleased to see even higher growth rates outside Denmark, driven by same store growth combined with the additions of new stores in Norway within the Svane brand. In July 2021 we entered into a strategic partnership with the online kitchen business Celebert. We have merged our mutual online brands and aim to exploit the signiﬁcant potential in this sales channel. TCM Group owns 45% of the merged activity with an option to acquire on the remaining shares. We strongly believe, that the market for selling kitchens online has a great potential, and we will support the growth journey a.o. by supplying products from our product assortment. In our ﬁnal comments, we would like to give our utmost appreciation to our employees and business partners, for whom 2021 was a Increased demand and supply chain constraints led to signiﬁcant higher prices on raw materials and components, which was passed on to our customers via sales price increases, however with some delay. Therefore impact from price ﬂuctuations during the year was a signiﬁcant adverse net inﬂuence on TCM Group’s earnings in the year. challenging year especially due to the unstable supply chain situation. The employees in the entire value chain have worked with great dedication to provide the best possible customer service despite the extraordinary challenges. To support our growth ambitions, we will continue to utilize and expand our production capacity in our existing sites. Continuous improvements and investments will provide an estimated additional production capacity of c. 50% in the existing facilities. 1,108 mio. 11% Revenue Organic like-for-like revenue growth The supply chain was exceptionally unstable during 2021, and we have struggled to limit the impact on our customers from the shortages in the supply to our production. Especially in the second half of the year we were impacted by unstable supply of critical components such as drawer systems. The situation has led to Sustainability with regards to people, planet and products are key to us. During 2021 we have reduced our carbon emission with 25% compared to 2020 through various initiatives, and we have expanded our FSC certiﬁcation to all cabinets with eﬀect from January 2022. We continue our eﬀorts and expand our focus to new areas with the intent to reduce our climate footprint (refer to further actions in the ESG section). We are pleased with a double- digit organic like-for-like growth rate and that we passed a new revenue milestone of DKK 1.1 billion. eﬃciency losses and the eﬀorts to limit the impact on our customers have led to additional costs, and the postponement of some deliveries and thereby revenue and earnings. During 2021 we made a substantial payout to our shareholders through a combination of ordinary and extraordinary dividend together with a share buy back program of DKK 150 million. For 2021 we will propose to the Annual General Meeting the distribution of an ordinary dividend of DKK 6 per share. Excluding treasury shares this We are determined to mitigate the current supply chain situation as well as possible, and together with our suppliers bring the supply chain situation back to normal. Sanna Mari Torben Paulin Suvanto-Harsaae TCM Group has a long track record as a growth case, and our ambitions is to continue the growth journey and strive for double-digit growth rates in the coming years. We see potential in all our corresponds to DKK 54 million. Furthermore, we will propose to the Annual General Meeting, that Chairman CEO * TCM Group has been a member of the United National Global Compact since 2011 and commits to the 10 UNGC principles. Chairman and CEO’s report Financial Highlights Our business Corporate governance ESG Financial statements TCM Group Annual report 2021 7 At Svane Køkkenet, we are driven by innovation. We are constantly challenging the established by curiously going new ways. Financial highlights Pure Lava with H22 Chairman and CEO’s report Financial Highlights Our business Corporate governance ESG Financial statements TCM Group Annual report 2021 8 Financial highlights Total of Revenue, DKK Organic revenue Growth Revenue AVERAGE EMPLOYEES Stores 9% Other countries 93 branded stores 1,108 11 % 504 across Scandinavia 91% Denmark Mi0. 39 Adjusted EBIT, DKK Adjusted EBIT Margin NWC ratio LEVERAGE RATIO Svane Køkkenet 31 Tvis Køkkener 23 Nettoline % % 138 Mio. 12.4 -7.4 1.33 Chairman and CEO’s report Financial Highlights Our business Corporate governance ESG Financial statements TCM Group Annual report 2021 9 stores in Norway primarily within Svane Køkkenet. The number of branded stores Business increased from 90 to 93 during 2021. Within Svane Køkkenet a new store opened in the city centre of Copenhagen, and within Tvis Køkkener a new store opened in Roskilde, whereas three new Nettoline stores were opened in Køge, Fjerritslev and Randers. The new store openings were oﬀset by two smaller store closures in Tvis Køkkener and Nettoline. review Reported revenue grew by 8.2% in 2021 to DKK 1,108 million (DKK 1,025 million). In January 2021 TCM Group sold its Svane Køkkenet store in Copenhagen to one of the existing franchisees, and in July 2021 TCM Group merged its online activities in kitchn.dk as part of the strategic partnership with Celebert. Like-for-like organic growth in 2021 was c. 11% disregarding the two elements above. In 2022 further new stores will be added to our store network. Within Svane Køkkenet this includes a new store in Copenhagen expected to open during the summer, and three new Svane Køkkenet stores in Fredrikstad, Arendal and Oslo in Norway expected to open during Q1 and Q2 2022. Within Nettoline we expect a new store to open in 2022 in Næstved. Revenue in Denmark grew from DKK 942 million in 2020 to DKK 1,011 million corresponding to an increase of 7.4%. Disregarding the negative revenue impact from the divestments of the Svane Køkkenet store in Copenhagen and the merge of the online activities in kitchn.dk and Celebert, the organic like-for-like growth in Denmark was c. 11%. Growth was driven by all three brands with the highest growth rates within our DIY segment (Nettoline and e-commerce). In July TCM Group entered into a strategic partnership with fast growing online kitchen business Celebert and joined forces merging the activities in kitchn.dk with the existing brands within the Celebert business. TCM Group initially acquired a 45% stake in the combined e-commerce business with an option to acquire the remaining 55% of the Celebert/kitchn.dk business at a later date. TCM Group will act as a supplier to the e-commerce activities, primarily through the Aulum factory. We continue to invest in our manufacturing setup, and during 2021 we have implemented a new board cutting and stacking solution in the main factory. We have implemented various other machinery in our production, which a.o. has supported a lower carbon emission from our production. This should be seen in light of our continued volume growth. In Tvis we have launched a combination of our two very popular designs M-line and Momento, where we combine various solid wood fronts with trendy mat laminate and hereby combining two of the strongest trends in one. Also in Tvis we have extended our veneer options with white oak and added solid oak drawers. Svane Køkkenet S19 Grund with H22 Revenue outside Denmark grew from DKK 83 million in 2020 to DKK 97 million corresponding to an increase of 16.7%. The growth was driven by both same store growth and revenue from new In Nettoline we have extended the number of colour options within our most popular designs. In Tirano and in Stecca we have extended with a new dark oak colour. In addition we have introduced a new green front, made of recycled chipboard covered by a foil made of 100 % recycled plastic foil. Innovation and development of new attractive products following the latest trends and customer demands is an important part of TCM Group’s strategy. In 2021 we have launched new products in all our three brands. Gross margin was inﬂuenced by the technical impact from the divestment of the Svane Køkkenet store in Copenhagen and the merge of the e-commerce activities in kitchn.dk and Celebert during 2021. Furthermore, the margin was negatively impacted by higher input cost which was passed on to the customers, however with a delayed eﬀect. In addition, the unstable supply chain situation and a change in sales mix with a higher share of revenue from 3rd party products with a structurally lower margin also had a negative impact on gross margin. Gross margin ended at 23.0% compared to 26.6% in 2020. In July TCM Group In Svane we have extended the colour options in our very popular S19 range in mat laminate. Wooden ﬁnishes is a strong trend and we have extended our veneer options with white oak and added solid oak drawers. Finally we have launched a new metal handle that create a very horizontal elegant look, and can be used for all existing fronts. The strategic focus on innovation and product development will continue in 2022, where we will launch new exciting designs in our three brands. entered into a strategic partnership with fast growing online kitchen business Celebert. 93 Branded stores at the end of 2021 Chairman and CEO’s report Financial Highlights Our business Corporate governance ESG Financial statements TCM Group Annual report 2021 10 Key figures and ratios DKK’000 2021 2020 2019 2018 2017 DKK’000 2021 2020 2019 2018 2017 Income statement Revenue Growth ratios 1,108,274 1,024,588 1,006,942 899,911 817,330 Revenue growth, % Gross proﬁt growth, % Adjusted EBIT growth, % EBIT growth, % 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% 36.3% 29.1% 70.6% 34.9% 51.3% Gross proﬁt 254,601 272,819 279,622 167,387 174,399 154,118 262,835 231,126 Earnings before interest. tax. depreciation and amortisation (EBITDA) 155,365 154,674 139,707 156,058 161,058 142,277 153,594 155,590 145,672 97,070 131,367 88,456 Adjusted EBITDA Net proﬁt growth, % 8.3% Earnings before interest. tax and amortisation (EBITA) Margins Adjusted operating proﬁt (EBIT) Operating proﬁt (EBIT) Financial items 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 -5,812 115,193 80,896 -14,155 66,741 47,993 Gross margin, % 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% 28.3% 16.1% 14.1% 9.9% Adjusted EBITDA margin, % Adjusted EBIT margin, % EBIT margin, % Proﬁt before tax 142,357 111,322 132,300 103,710 Net proﬁt for the year Other ratios Balance sheet Solvency ratio, % 46.3% 1.33 61.8% -0.23 51.9% 0.31 48.4% 0.58 37.8% 1.72 Total assets 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 90,718 805,541 -80,821 225,818 304,777 Leverage ratio Net working capital Net interest-bearing debt (NIBD) Equity NWC ratio, % -7.4% 2.6% -11.4% 3.0% -10.8% 1.5% -10.5% 1.0% -9.9% 1.0% Capex ratio excl. acquisitions, % 472,744 408,839 Cash Flow Share information Free cash ﬂow excl. acquisitions of operations Capex excl. acquisitions Cash conversion, % 44,462 29,168 58.3% 101,048 30,993 85.8% 132,326 14,996 99.9% 141,409 9,192 99,797 8,418 Number of outstanding shares 9,174,073 9,584,933 825,927 11.55 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000 Weighted average number of outstanding shares Number of treasury shares 102.6% 110.0% 0 10.22 10.22 0 11.13 11.13 0 10.37 10.37 0 4.80 4.51 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. Reference is made to description in note 1 Accounting policies. 11.54 Chairman and CEO’s report Financial Highlights Our business Corporate governance ESG Financial statements TCM Group Annual report 2021 11 Operating expenses - cost ratio 10.5% Revenue (DKKM) Adjusted Ebit (DKKM) Operating expenses in 2021 were DKK 116.8 million (DKK 133.1 million). The decrease in operating expenses of DKK 16.3 million was primarily due to the divestment of the Svane Køkkenet store in Copenhagen and the merge of the e-commerce activities in kitchn.dk and Financial 1400 1200 1000 800 600 400 200 0 220 200 180 160 140 120 100 80 review Celebert. Operating expenses amounted to 10.5% of revenue in 2021 against 13.0% in 2020. Development in activities and finances Adjusted EBITDA – 14.0% margin Adjusted EBITDA in 2021 was DKK 154.7 million (DKK 161.1 million), corresponding to an EBITDA margin of 14.0% (15.7%). The decrease in Adjusted EBITDA was primarily driven by a lower gross proﬁt. 60 revenue - 8.2% organic growth Revenue in 2021 grew by 8.2% to DKK 1,108.3 40 20 million (DKK 1,024.6 million). 0 Revenue in Denmark was DKK 1,011.4 million (DKK 941.6 million). The organic like-for-like growth was 11% with total revenue growth being lower due to the divestment of the Svane Køkkenet store in Copenhagen to a franchisee and the merge of the e-commerce activities in kitchn.dk and Celebert. The organic growth was driven by all three brands with the highest growth rates within our DIY segment (Nettoline and e-commerce). Adjusted EBIT – 12.4% margin Adjusted EBIT in 2021 was DKK 137.8 million (DKK 139.7 million), corresponding to an adjusted EBIT margin of 12.4% (13.6%). The decrease in adjusted EBIT was driven by a lower gross margin. Depreciations and amortizations were DKK 16.9 million (DKK 21.3 million). Non-recurring items The organic growth was driv- en by all three brands with the highest growth rates within our DIY segment (Nettoline and e-commerce). 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 and are speciﬁed below: Revenue in Other countries was DKK 96.9 million (DKK 83.0 million), up 16.7%. Gross profit - gross margin of 23.0% Gross proﬁt in 2021 was 254.6 DKK million (DKK 272.8 million), corresponding to a gross margin of 23.0% (26.6%). The divestment of the Svane Køkkenet store in Copenhagen and the merge of the e-commerce activities in kitchn.dk and Celebert had a technical negative impact on gross margin. Furthermore, the gross margin was negatively impacted by signiﬁcantly increased raw material prices, the unstable supply chain situation and a change in sales mix. non-recurring items Non-recurring items, DKK m 2021 2020 Costs related to Covid-19 and supply chain disruptions 14.0 1.3 5.0 0.0 Restructuring Reported revenue growth Adjusted EBIT margin Net gain from the Celebert/ kitchn.dk transaction -13.5 0.0 Gain from the divestment of an own operated store -2.5 0.0 8.2% 12.4% Total -0.7 5.0 * Figures in brackets refer to the corresponding period in 2020. Chairman and CEO’s report Financial Highlights Our business Corporate governance ESG Financial statements TCM Group Annual report 2021 12 Net working capital (dkkm) EBIT The increase in inventory of DKK 29.5 million was due to impact from increased raw material prices, and a management decision to establish a buﬀer of parts and raw materials to ensure higher delivery assurance. Equity - solvency ratio 46.3% EBIT for the ﬁnancial year 2021 increased to DKK 138.4 million (DKK 134.7 million). The increase in EBIT was driven of positive development in non- recurring items compaired to 2020 oﬀ-set by a lower gross proﬁt. Equity at the end of 2021 amounted to DKK 419.7 million (DKK 574.4 million). The equity decreased by DKK 154.7 million since 1 January 2021 due to dividend distribution of DKK 130.0 million and the implementation of a share buy back program, of which DKK 136.0 million has been carried out during 2021. 0 -20 -40 Trade receivables and other receivables increased by DKK 8.8 million. Other receivables as of 31 December 2021 is excluding the value of DKK 7.1 million, which relates to subleases due to the implementation of IFRS 16. This is not included in the net working capital. -60 Net profit Net proﬁt for the ﬁnancial year 2021 increased to -80 DKK 110.7 million (DKK 102.2 million). The Board of Directors recommends to the Annual General Meeting to distribute an ordinary dividend of DKK 6 per share. Excluding treasury shares this corresponds to DKK 54 million. Furthermore, to provide a mandate to the Board of Directors with the option to distribute an extraordinary dividend during 2022 in the range DKK 25-75 million. -100 -120 -140 -160 -180 Free cash flow excl. acquisitions of operation Free cash ﬂow excl. acquisitions of operations for 2021 was DKK 44.5 million against DKK 101.0 million in 2020. Free cash ﬂow was negatively impacted by change in NWC of DKK -38.3 million compared to DKK 7.3 million in 2020. The extended credit for VAT and payroll had a negative impact of DKK 9 million in 2021 compared to a positive impact of DKK 15 million in 2020. The operating liabilities decreased by DKK 1.4 million. The extended credit for VAT and payroll taxes provided in the goverment's stimulus package impacted the operating liabilities positively by c. DKK 6 million as of 31 December 2021 compared to DKK 15.0 million last year. Furthermore, the transfer of the holiday allowance to the government fund lowered other payables by DKK 19 million in 2021. The solvency ratio was 46.3% at the end of 2021 (61.8%). Cash conversion in 2021 was 58.3% (85.8%). 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 working capital - NWC ratio -7.4% Net interest-bearing debt – leverage ratio 1.33 Net interest-bearing debt amounted to DKK 199.5 million at the end of 2021 (DKK -42.9 million). The Board of Directors recommends to distribute an ordinary dividend of DKK 6 per share Net working capital at the end of 2021 was DKK -81.6 million (DKK -117.0 million). NWC ratio at the end of 2021 was -7.4 (-11.4%). NWC ratio (%) Leverage ratio Tvis Køkkener Momento Vulkansk sort with M-line valnød 1.33 -7.4 Chairman and CEO’s report Financial Highlights Our business Corporate governance ESG Financial statements TCM Group Annual report 2021 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. Capri Our Business Chairman and CEO’s report Financial Highlights Our business Corporate governance ESG Financial statements TCM Group Annual report 2021 14 We create better kitchen environments for the heart of your home We will be the customers’ first choice of kitchens Strengthen the value chain through continuous improvement Friendly and professional customer service throughout the value chain Aim for double-digit annual revenue growth Agile and ﬂexible supply chain Responsibility for people, planet and products Realize the potential in Norway Create capacity through simpliﬁcation Develop competencies and resources Quality in everything we do New customer service concept Invest in eﬃcient production facilities A proactive and result-oriented mindset Brand and product development Increase digitalization Values Chairman and CEO’s report Financial Highlights Our business Corporate governance ESG Financial statements TCM Group Annual report 2021 15 Strategy Financial outlook 2022 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 and secondary in continental Europe. 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 will start selling to the Norwegian and Swedish markets through the online channel. Strategy TCM Group estimates revenue for the ﬁnancial year 2022 to be in the range DKK 1,150-1,225 million corresponding to an organic growth of 4-11%. and financial targets 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. EBIT is estimated to be in the range DKK 140-170 million. 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. EBIT excluding To support the growth ambitions in all brands and markets, we continue to invest in extended 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. non-recurring items 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. For Svane Køkkenet in Norway, the target is to open another 8-10 stores, and thereby to bring the store network up to 18-20 stores. 3 new stores will open up early in 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. 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. 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. The Tvis Køkkener 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. 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. 4-11% Estimated organic growth for the ﬁnancial year 2022 Chairman and CEO’s report Financial Highlights Our business Corporate governance ESG Financial statements TCM Group Annual report 2021 16 Aulum Store openings Danish design production sites 2021 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 Total planned store openings 5 5 1 Svane Køkkenet Tvis Køkkener 4 Svane Køkkenet Tvis Køkkener 1 0 branded stores 3 Nettoline 1 Nettoline 31 december 2021 93 Storage solutions Products production In denmark e.g. sliding doors 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 Denmark Norway Denmark Norway Sweden and Norway to open in 2022 Sweden Iceland Iceland Faroe Islands Faroe Islands Chairman and CEO’s report Financial Highlights Our business Corporate governance ESG Financial statements TCM Group Annual report 2021 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 of other players in the industry. Such acquisitions 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 orderproducing with a high degree of ﬂexibility in the workforce, which means that the Group can respond quickly to market demand changes. Customer risks cooperation with our insurance company. We have our own maintenance department who in cooperation with external experts conduct the necessary machine maintenance and repairs. The Group’s risks relate primarily to the sales development of the stores, with sales being distributed through 93 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. Beside this yearly assessment, the Board of Directors and the Executive Management have a continuous dialogue regarding signiﬁcant risks with possible material impact on the Group. Reputational risks The Group considers the Svane Køkkenet, Tvis Køkkener 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 products’ Finally, we have a constructive cooperation with our production employees typically based on multi-year collective wage negotiation agreements. 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 attractiveness and customer appeal. Accordingly, the Group’s brand reputation is important for sustaining and growing the Group’s revenue and proﬁtability. 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. Strategy risks In 2021 the Covid-19 pandemic has caused global supply challenges. To ensure higher delivery assurance, the management decided to establish a buﬀer of parts and raw materials. 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 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 2021 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’s type and size. 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. 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 zone. Invoicing of sales is charged in DKK and NOK. In terms of invoicing of sales in NOK, we 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 It is Group policy to fully or partially hedge interest rate risks on loans if the interest rate risk is material. The group manages interest rate risk by maintaining an appropriate mix between ﬁxed and ﬂoating rate borrowings, and by use of interest rate swap contracts. The Group’s ﬁnancial risks are managed centrally as well as the Group’s liquidity management, including cash requirement and placement of excess liquidity. Tvis Køkkener M-line Eg Chairman and CEO’s report Financial Highlights Our business Corporate governance ESG Financial statements TCM Group Annual report 2021 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 Future Governance Chairman and CEO’s report Financial Highlights Our business Corporate governance ESG Financial statements TCM Group Annual report 2021 20 ensure continuous value creation. The Nomination Committee DATA PROTECTION POLICY 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 member of the Remuneration Committee. The Chairman of the Board of Directors is also the Chaiman of the Nomination Committee. The overall purpose of the Nomination Committee is to help the Board of Directors ensure that appropriate plans and processes are in place for the nomination of candidates to the Board of Directors and the Executive Management. The Nomination Committee consists currently 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 2021. 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 Corporate governance investor-en.tcmgroup.dk/CorporateGovernance TCM Group is committed to exercising good corporate governance, and the Board of Directors therefore evalu- ates the Group’s management systems at least once a year to ensure that the structure is appropriate relative to the Group’s shareholders and other stakeholders. Composition of the Board of Directors The Board of Directors currently consists of ﬁve 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 business people 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 Nasdaq Copenhagen has incorporated 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 2021. 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 on 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 investor-en.tcmgroup.dk/CorporateGovernance 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 2021, 11 board meetings were held. 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 5 meetings in the ﬁnancial year 2021. 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 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 11 Board meetings in 2021 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 2021 21 remuneration is designed to align the interests of 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, 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. 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 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; Monthly revenue reports, on a per store basis, of the Group’s sales to stores; 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. 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; Four-eye principle within the ﬁnance depart- ment to ensure the quality of the accounting records; 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. • • The predominant majority of all invoices received go through a standardised authori- sation process. In addition, a detailed review of cost on account level is made in connection with the monthly reports. 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 Tvis Køkkener Future Chairman and CEO’s report Financial Highlights Our business Corporate governance ESG Financial statements TCM Group Annual report 2021 22 Chairman of Audit Committee and member of Nomination Committee and Remuneration Committee. Independent. Danish nationality. Born in 1972. Board of Directors and Executive Independent. Member since: 2018 Danish nationality. Participated in 11 board meetings in 2021. Number of shares end 2021: 3,850 (2020: 3,850) Born in 1962. Member since: 2017 Participated in 11 board meetings in 2021. Number of shares end 2021: 7,653 (2020: 7,653) Søren Mygind Eskildsen holds a Bachelor of Engineering and MBA from the Southern University of Denmark. Management Anders Skole-Sørensen holds a MSc Anders SØREN MYGIND ESKILDSEN econ. from the University of Copenhagen. Other positions: Skole-Sørensen Søren Mygind Eskildsen is CEO of Louis Poulsen A/S. Deputy Chairman Board member Other positions: Anders Skole-Sørensen is CFO at Matas A/S (listed on Nasdaq Copenhagen). Søren Mygind Eskildsen is chairman of board of directors of Ege Carpets A/S. Board of In addition Anders Skole-Sørensen is a member of the board of directors of F. Uhrenholt Holding A/S and entities within the Matas group. Directors Chairman of Nomination Committee and Remuneration Committee and member of Audit Committee. Member of Nomination Committee and Remuneration Committee. Independent. Independent. Danish nationality. Born in 1968. Independent. Danish nationality. Member since: 2019 Participated in 11 board meetings in 2021. Danish and Finnish nationality. Born in 1966. Born in 1959. Member since: 2018 Number of shares end 2021: 4,400 (2020: 4,400) Member since: 2016 Participated in 11 board meetings in 2021. Number of shares end 2021: 2,441 (2020: 2,441) Participated in 11 board meetings in 2021. Number of shares end 2021: 19,781 (2020:19,781) Danny Feltmann Espersen holds a MSc in accounting and Finance from Aarhus Business School. Carsten Bjerg holds a Bachelor in Production Engineering from the Technical University of Denmark. Sanna Mari CARSTEN BJERG Board member Danny feltmann espersen Sanna Mari Suvanto-Harsaae holds a Other positions: Suvanto-Harsaae Bachelor of Science from Lund University. Danny Feltmann Espersen is CEO of Designers Company A/S and associated entities. Chairman of Other positions: Board member the company Other positions: Carsten Bjerg is deputy chairman of the board of directors of Rockwool International A/S (listed on Nasdaq Copenhagen) and a member of the board of directors of COWI Holding A/S, Aarhus Universitet, Dansk Smede- og maskinteknik A/S, and Agrometer A/S. 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 vice chairman of board Anora Oyj and Harvia Oyj. Sanna Mari Suvanto- Harsaae is also member of the board of directors of Elopak AS, Broman Group Oyj and CEPOS. Carsten Bjerg is chairman of board of directors of Guldager A/S, Robco Engineering A/S, Hydrema A/S, Bogballe A/S, Bjerringbro-Silkeborg EliteHåndbold A/S, and Arminox A/S. Chairman and CEO’s report Financial Highlights Our business Corporate governance ESG Financial statements TCM Group Annual report 2021 23 Executive Management Since March 2020 Danish nationality. Born in 1965. Number of shares end 2021: 10,000 (2020: 10,000) 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. Torben Paulin Other positions: Torben Paulin is member of the board of directors of Zefyr Invest A/S. Chief Executive Oﬃcer Since 2015 Danish nationality. Born in 1975. Number of shares end 2021: 39,902 (2020:39,902) Prior to joining the Group, Mogens Elbrønd Pedersen had worked with Bang & Olufsen A/S (listed on Nasdaq OMX Copenhagen), Bestseller and PwC. Mogens Elbrønd Pedersen Chief Financial Svane Køkkenet Oﬃcer S19 Strand with Echo Chairman and CEO’s report Financial Highlights Our business Corporate governance ESG Financial statements TCM Group Annual report 2021 24 Shareholder information TCM Group A/S is a part of the Nasdaq OMX Copenhagen Mid Cap index. The share price closed at DKK 159.0 on 31 December 2021, equivalent to an increase of 14,4% in 2021. TCM Group was listed November 2017 with a share price of 98. Financial calender TCM Group 1st January 2021 = 100 TCM Group share price development in 2021 Indexed share price development OMX C25 index 1st January 2021 = 100 The ﬁnancial year covers the period 1 January – 31 December, and the following dates have been ﬁxed for releases etc. in the ﬁnancial year 2022: 125 120 115 110 Share capital 5 april 2022 105 100 95 The nominal value of the company’s share capital at 31 December 2021 was DKK 1 million divided into shares of DKK 0.1, equivalent to 10 million shares and 10 million votes. As of 31 December 2021, TCM Group A/S ownes 832,227 treasury shares, corresponding to 8.3% of the share capital. Annual General Meeting 2021 18 may 2022 90 Interim report Q1 2022 Ownership At 31 December 2021, six shareholders had notiﬁed shareholdings above 5% of the share capital (see below). 19 august 2022 Interim report Q2 2022 Members of the Board of Directors held at 31 December 2021 38,125 shares, and members of the Executive Management held 49,902 shares, in total 88,027 shares, equivalent to 0.9% of the share capital. 15 november 2022 Interim report Q3 2022 24 february 2023 Interim report Q4 2022 and annual report 2022 Business NAme registration no Domicile Share 13 april 2023 Arbejdsmarkedets Tillægspension BI Asset Management Fondsmæglerselskab A/S Paradigm Capital Value Fund TCM Group A/S (treasury shares) Handelsbanken Fonder AB 43405810 20896477 B129149 Hillerød, Denmark Copenhagen, Denmark Luxembourg, Luxembourg Holstebro, Denmark 10.2% 8.6% 8.4% 8.3% 7.1% Annual general meeting 2022 37291269 556418-8851 B232467 Stockholm, Sweden Luxempart S.A. Leudelange, Luxembourg 5.6% Chairman and CEO’s report Financial Highlights Our business Corporate governance ESG Financial statements TCM Group Annual report 2021 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 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 Board of Directors proposes an ordinary dividend of DKK 6 per share for the 2021 ﬁnancial year. Excluding treasury shares this corresponds to DKK 54 million. Furthermore, to provide a mandate to the Board of Directors with the option to distribute an extraordinary dividend during 2022 in the range DKK 25-75 million. Analyst coverage TCM Group is currently covered by ﬁve analysts: ABG Sundal Collier Benjamin Silverstone Aktieinfo John Stihøj Carnegie Lars Topholm Danske Bank Poul Ernst Jessen SEB Ulrik Bak Contact Payment of dividends, and the amounts and timing thereof, will depend on a number of factors, including future revenue, proﬁts, ﬁnancial conditions, general economic and business conditions, future prospects, 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. For further information, please contact: CEO Torben Paulin +45 21210464 CFO Mogens Elbrønd Pedersen +45 97435200 IR Contact mail: [email protected] Annual general meeting The annual general meeting will be held on Tuesday, 5 April 2022 at 5 p.m. at Skautrupvej 22b, Tvis, 7500 Holstebro. Share information Exchange: Nasdaq Copenhagen Trading symbol: TCM018 Identiﬁcation number/ISIN: DK0060915478 Number of shares: 10 million shares of DKK 0.1 each with one vote Furthermore, the dividend policy is subject to change as decided by the Board of Directors from time to time. Share classes: 1 Svane Køkkenet Sector: Kitchens, bathrooms and storage Segment: MID CAP S19 Light Grey Chairman and CEO’s report Financial Highlights Our business Corporate governance ESG Financial statements TCM Group Annual report 2021 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. To increase our eﬀort even further sustainability is now an integrated part of our business strategy. ESG Chairman and CEO’s report Financial Highlights Our business Corporate governance ESG Financial statements TCM Group Annual report 2021 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 2021 Co2 emission reductioN 2021 Accidents 2021 Sickdays caused by work accidents This section covers Communication on Progress according to United Nations Global Compact and the statutory statement by the Danish Financial Statements’ Act 99a, 99b and 107b. 2021 2020 21 Sustainable forestry by 2022 34 25% Absence ratio related to 0.06‰ work accidents in 2021 Waste recycle 2021 Gender equality By weight TCM Group has a target for the Board of Directors that both genders are represented by at least 20%. As of 31 December 2021, the distribution is 20%/80% underrepresented gender, which means that the target is met. 80% Board of directors 20% 80% Board of directors Management 21% 79% employee 32% 68% 99.5% 100% 20% Chairman and CEO’s report Financial Highlights Our business Corporate governance ESG Financial statements TCM Group Annual report 2021 28 Our value chain impact 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 in everything we do. Product Production of raw materials Transport of raw materials Manufacture Sales Transport Use Waste and recycling development Sustainability is an integrated part of our design process. We develop high quality products with long durability. Majority of our suppliers are placed locally Together with our suppliers we work In manufacturing we work continuously with health and safety and with optimizing and minimizing the use of materials. We inspire and challenge to the most sustainable solution for our We coorporate very closely with our external distributors to maximize truck loads. Our kitchens are of high quality, very durable and indoor climate labelled to reduce impact on the RE:DUCE-RE:USE -RE:THINK We audit the work of our suppliers on social, environmental an ethical issues. actively to secure the optimum transport form. is the foundation for our work with materials and processes. customers. indoor environment. Chairman and CEO’s report Financial Highlights Our business Corporate governance ESG Financial statements TCM Group Annual report 2021 29 our 1. 2. 3. 4. ESG-Strategy A sustainable work life We take responsibility NEW WAYS AHEAD Together we improve Strategic choice no 3 Responsibility for people, planet and products 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. To increase our eﬀort even further sustainability is now a integrated part of our business strategy (page 14-15). The strategy is clearly linked to the UN Sustainability goals, and the 10 principles of Global Compact and have 4 strategic focus areas. Chairman and CEO’s report Financial Highlights Our business Corporate governance ESG Financial statements TCM Group Annual report 2021 30 1. 3. 2. A sustainable worklife We take NEW WAYS AHEAD responsibility Our employees are our most important assets and the key to success both from a business and sustainability perspective. At TCM Group we work actively to create “a sustainable work life” characterized by the following principles All our products are designed and produced in Denmark. Production is based on proud traditions of high quality and good Innovation and product development has always been a part of our DNA. To accelerate our product development, we have included three focus areas in our current design and innovation process under the principle “New ways ahead”. The areas are, extended lifecycle, circular design and healthy indoor climate. craftmanship, combined with innovative production methods. We set high standards for our business partners and ourselves to improve in everything we do. • • A safe and secure work environment that also enhances personal development. Flexibility to support a clear balance between work/private life, between individuals, teams, and organization. Diversity and social commitment. The focus area of our production is a clear reduction in our impact on the climate. We aim to have a C02 neutral production by 2028 (scope 1+2), reduce our production waste and increase the volume of waste that is recycled. • 4. Together we improve At TCM Group we want to promote a positive impact towards the climate. Through transparency, corporation and with focus on both downstream and upstream activities we work actively to promote a positive impact. We aim to have a CO2 neutral production by 2028 (scope RE:USE Our ESG mindset RE:DUCE 1+2), reduce our production waste and increase the volume of waste that is recycled. RE:THINK Chairman and CEO’s report Financial Highlights Our business Corporate governance ESG Financial statements TCM Group Annual report 2021 31 dents from becoming accidents. Since 2018 the number of work-related accidents has decreased by 89%, showing a clear trend in right direction. It is still our clear ambition to have zero work-re- lated accidents in our organization. place within the company or via our suppliers. The measures are e.g., full implementation of a whis- tle blower system and conducting arbitrary sup- plier audits. Both measures will be further out- lined in sections “Whistle Blower System” and “Supplier Management”. Sickdays and absence A sustainable #sickdays caused by work accidents Flexibility is deﬁned diﬀerently in diﬀerent work- ing groups. Hence sustainable work life focus is to oﬀer and support a higher degree of ﬂexibility that supports a clear balance between work life/private life for the individual employees but also between teams. worklife TCM Group can ﬁrmly state that no products sold in 2021 were developed or produced using child labor. 2021 21 Labour and working conditions 2020 2019 34 In TCM Group, we continuously strive to create a working environment characterized by a high focus on safety both mentally and physically and a good collegial unity. In 2021 the overall absence related to sickness (excl. absence due to sick children and maternity leave) in TCM Group was at 3.3% in 2021 versus 2.9% in 2020. The primary reason to this increase is due to covid-19. Even though we have managed to limit the virus from spreading within our organization, we have had a high number of employees aﬀected by the virus, which is visible in the absence related to sickness. UN Global Compact principle 1, 2, 3, 4, 5, 6, 10 83 Our employees are our most important assets and the key to success both from a business and sustainability perspective. At TCM Group we work actively to create “a sustainable work life” deﬁned as our approach to how we work with social aspects of our business and characterized by the following principles We encourage our employees to continuously improve their skills and capabilities through training and education, to contribute to both their own and the company’s development. Absence ratio related to work accidents in 2021 0.06‰ 3.3% Absence ratio related to sickness in 2021 In 2021, we have continued our intensive eﬀort to live up to our ambition that one work-related accident is one too many. Due to the Covid-19 pandemic our safety eﬀort has had to balance zero work related accidents as well as keeping Covid-19 away from our facilities. • A safe and secure work environment that also enhances personal development. We continue to oﬀer light duty jobs for employees who temporarily are not able to perform their nor- mal job, and we have a continuous dialogue with employees who have an absence level higher than the standard, to understand the reasoning behind their absence. • Flexibility to support a clear balance between work/private life, between individuals, teams, and organization. • Diversity and social commitment. We work systematically with continuous reporting and follow-up on both actual work-related acci- dents and near-miss incidents that under critical circumstance could have led to an accident. This eﬀort has resulted in concrete improvements and preventive actions while contributing to a general understanding of and focus on which work situa- tions and circumstances possess a potential risk. Reported near miss Human rights We conduct regular surveys of our workplace, by asking all employees to rate their working condi- tions and encourage them to give their recommen- dations and ideas on how we can improve our working environment and we use this input actively to support a sustainable worklife. work accidents TCM Group strongly support and promote the principles regarding human rights outlined in the UN Global Compact principles, and it is of utmost importance to us that we comply with these principles at any point in time. The primary risks we face in connection to human rights non-com- pliance are discrimination of employees and cases where speciﬁc conditions at our suppliers do not comply with the human rights principles. TCM Group takes speciﬁc measures to ensure that no incompliance with human rights principles takes #of reported near miss work accidents in TCM Group 2021 896 The number of near-miss reported incidents is not at the same level as last year, but this combined with the large decrease in the number of accidents, clearly shows that we are able to prevent the inci- 2020 2019 1,159 1,139 Chairman and CEO’s report Financial Highlights Our business Corporate governance ESG Financial statements TCM Group Annual report 2021 32 Apprentices in TCM GROUP TCM Group is determined to support the education of our next generation workforce. We do so by hiring apprentices in our production and in our administration. Through a structured job analysis, we always deﬁne what proﬁle will beneﬁt to business and team. This includes the diversity of a team, skills, knowledge, personality, etc. Based on that we identify new candidates for the board, executive management, and our workforce in general. As far as possible, we assure that the ﬁnal pool of candidates is diversiﬁed. Our goal is to continue ensuring this diversity in the candidate ﬁeld through clear recruitment and promotion processes. Gender diversity (# of underrepresented gender) 2021 2020 2019 During 2021 we have increased collaboration with local educational institutions. To increase aware- ness of the opportunities for non-academic jobs as well as the opportunities that exist in the local environment. Board of directors 1 of 5 1 of 5 1 of 5 (20%) (20%) (20%) 20% 80% 79% 68% Mgmt. (executive mgmt. and mgmt. group) In 2021 the number of apprentices in TCM Group was 13. In a Covid-19 environment we have not managed to attract the number of apprentices that we were aiming for. It is our clear ambition that in 2022 we will increase our focus on attracting and hiring apprentices. 3 of 14 (21%) 4 of 15 (27%) 2 of 10 (20%) TCM Group does not accept discrimination of any kind e.g., regarding age, nationality, gender, reli- gion, sexual orientation, disability etc. 21% Total workforce of underrepresented gender 32% 29% 29% 32% TCM Group has a target for the Board of Directors that both genders are represented by at least 20%. As of 31 December 2021, the split is 2021 2020 2019 # of apprentices in TCM group 20%/80%, which means that the target is met. 13 16 17 We operate in an industry where several jobs tra- ditionally have an overrepresentation of one gen- der. We are therefore proud of the fact that we have managed to attract employees who have taken non-gender stereotypical education choices. For instance, we have had 2 female apprentices in 2021 as production technicians. Diversity TCM Group is determined to promote diversity and achieve a sensible gender diversity in both the Board of Directors and the Executive Management and other management levels. We believe that diversity is a strength. This applies to gender, cul- ture, educational background, age and personality. Therefore, we try to the best of our ability to create balanced teams, by supporting diversity through our entire organization. Compensation At TCM Group it is our clear policy that equal jobs are rewarded with equal pay. Any diﬀerence in pay is solely based on qualiﬁcations and experience. CEO total compensation relative to FTE average total compensation 8.8 We believe diversity is a strength. Chairman and CEO’s report Financial Highlights Our business Corporate governance ESG Financial statements TCM Group Annual report 2021 33 remaining 8% of the emissions was related to transport activities (company cars and vehicles at our production facilities). Compared to 2020 there has been a shift from indirect energy emissions (scope 2) to direct emissions (scope 1). key figures We take 2021 2020 Total Total responsibility Total Percent [ton CO2] [ton CO2] [ton CO2] of total Our eﬀort to reduce our CO2 emission have in 2021 lead to a direct reduction of 7%. At the same time the infrastructure consisted of more green energy and in 2021 we updated the emission factor for CO2 to 2020. This means that the overall reduction in CO2 in 2021 is 25%. Scope 1 (GRI: G4-EN15) Scope 2 (GRI: G4-EN16) 1,299 1,041 55% 45% Scope 1 (GRI: G4-EN15) Scope 2 (GRI: G4-EN16) 1,435 1,703 46% 54% Total 2,340 100% Total 3,138 100% UN Global Compact principles: 7, 8, 9 A high degree of this decrease was due to the fact that during 2021 TCM Group have made several changes to our heating system in order to reduce our CO2 impact. For instance our heating system has been changed from heating oil to air-to-air electrical heating pumps. At our factory in Aulum the compressors have been replaced. Heat generated by the compressors are reused as heating of the factory creating a signiﬁcant reduction of the consumption of natural gas required for heating and reduction of electricity at this factory. Environmental sustainability In 2021, our total scope 1+2 emission has Emission per 1 mDKK net revenue in ton CO2e/mDKK TCM Group is committed to reduce the environmental impact of our production and supply chain. To create transparency on the progress of our impact, we measure our CO2 emission, by following the GRI (Global reporting initiative) standards 305-1 Direct (Scope 1) GHG emissions and 305-2 Energy indirect (Scope 2) GHG emission. Scope 1 implies the direct emissions from our business activities whereas Scope 2 measure the indirect emissions via our electricity and heat consumption. Further information about the GRI standards is available at www.globalreporting.org/standards. decreased to 2,340 ton CO2. The reduction combined with a higher actitity level means that our emission in 2021 was 2.1 ton CO2 per 1 mDKK net revenue. 2021 2020 2.1 In 2020, our total scope 1+2 emission was 3,138 ton CO2. This means that our emission was 3.1 ton CO2 per 1 mDKK net revenue. 3.1 In 2021 we have initiated to measure our Other indirect (Scope 3) GHG emission (GRI standard 305-3) with focus on our impact from downstream transportation and distribution. The aim of TCM Group is to have a better overview of Scope 3 during 2023 and to be able to set signiﬁcant reduction targets. To succeed, our primary focus is to enhance transparency and secure data validity through our value chain. While working to establish a baseline for our scope 3 impact, it is our clear ambition to ensure that our production will be CO2 neutral by 2028. Distribution of Co2 emission Transport reductioN 2021 Co2 emission 2021 2020 8% 7% Electricity 25% The shift in the distribution of our C02 emission in 2021 compared to 2020, is a direct result of a higher decrease of electricity consumption compared to heating consumption. At the same time the ﬂeet of company cars increased from 2020 to 2021. The increase is a result of servicecars is now being included into the TCM Group company car ﬂeet. 44% 54% Heating 48% 39% Emissions The main sources of emission are our electricity and heat consumption, which are mainly related to our production facilities. In 2021 the distribution of our total scope 1+2 emission was that 44% of the emission was related to our electricity consumption whereas our heat consumption accounted for 48% and the Chairman and CEO’s report Financial Highlights Our business Corporate governance ESG Financial statements TCM Group Annual report 2021 34 Electricity consumption Waste In 2021 the distribution of waste was as illustrated below Based on tons waste. The consumption of electricity in relation to revenue has decreased by 40% during 2021 compared to the year before. This was a result of a direct saving in electricity together with an increased activity level in 2021. The direct savings was due to the fact that TCM Group has made several investments to increase energy eﬃciency. As a manufacturing company, we are very much focused on our waste output. Our strategic approach RE:DUCE – RE:USE - RE:THINK is the foundation in the way we think about materials and production processes. We have several smaller material categories in our production currently used as energy recovery or landﬁll or hazardous waste. It is our clear ambition to increase the level of waste for recycling into all material categories and by 2025 to increase the level of recycled waste materials to 99,7% (based on weight). A way to this is to reduce the The primary material group used for production of our products is chipboards. Approximately 95% of all chipboards used consist of min. 90% recycled wood. The wood originates partly from post- consumer production waste collected at Danish recycling stations and pre-consumer production waste from Danish industrial production including TCM Group. This means that 100% of TCM consumption of materials and optimize process to reduce process waste and rethink our materials as well as challenge standard material ﬂows. One way to this is via partnerships. TCM Group has joined forces with TheUpcycl to ﬁnd new ways. 40% TheUpcycl’s purpose is to create new collaboration within the production industry to accelerate the circular usage of New Waste materials. See more at https://www.theupcycl.com/ Decrease in the Group’s production waste related to chipboard is directly recycled into new chipboard. This is why the level of waste material recycled is high. consumption of electricity in relation to revenue during 2021 99.5% Recycle Electricity consumption (KWH) per KDKK Revenue 0.5% 0.38% Energy recovery 0.02% Landfill 2021 7.7 0.06% Hazardous waste 2020 12.8 13.1 2019 Chairman and CEO’s report Financial Highlights Our business Corporate governance ESG Financial statements TCM Group Annual report 2021 35 We will validate lifecycle and circular capabilities of our designs, through our product durability index and get a balanced assessment of the overall capabilities of our products and their design. The product durability index will helps us to ensure a holistic approach that include the entire lifecycle. NEW WAYS AHEAD A healthy indoor climate Today people spend more than 90% of their time indoor. We constantly work with improving our products and the impact they have on the indoor environment. To validate this, we use third parties and external certiﬁcations. It is our clear ambition that by 2024 all our kitchen models are validated by external certiﬁcation bodies in terms of their performance towards a healthy indoor climate. UN Global Compact principles: 12 Innovation and product development has always been a part of our DNA. In order to accelerate our product development, we have included three focus areas in our current design and development process under the principle New Ways Ahead. Indoor climate certificate Extended lifecycle # of certiﬁcate 7 We design, develop and produce high quality products with high durability. In order to decrease our climate impact and maximize the value of our products, we are focusing on extending the life of our products, their design and their use. Extending the lifecycle of our products is also to ensure that existing kitchens can be upgraded to match current living and design standards. Our clear ambition is to ensure that all kitchen models produced from 2010 can be extended and upgraded by 2023. % of product lines covered by external validation 75% Circular design As manufacturer, we are very conscious of which resources we use for our products and how they aﬀect the environment. We have strong focus on reducing material volume, increasing the proportion of recycled materials rather than virgin and ensuring that our products can be included in new material ﬂows. Going forward circular designs is an embedded part of our product development. By 2025 all our new designs will be 100% circular. Svane Køkkenet Pure Lava with H22 Chairman and CEO’s report Financial Highlights Our business Corporate governance ESG Financial statements TCM Group Annual report 2021 36 Certiﬁed sustainable forestry is a guarantee that reforestation and good working conditions are secured and biological diversity is preserved. Sustainable forestry by 2022 Together we Transport improve The products from TCM Group are delivered by truck. We have chosen to use external distributors as it helps to optimize distribution and means of transportation. We always strive to ensure that all parts of the customer order (cabinets, worktop, white goods etc) are delivered in one delivery and in the most optimal way. To further reduce RE:USE Our ESG mindset RE:DUCE UN Global Compact principles: emission from transport we strive to minimize the number of kilometers driven. Our distribution system ensure that empty trucks pick up third- party products on the return journey to the factories. Reducing CO2 emission from transport and creating convenience to our customers. 1, 2, 3, 4, 5, 6, 7, 8, 9, 10 At TCM group we want to create a positive impact that extends beyond our own operation. This requires close corporation with our suppliers and business partners in both downstream and upstream activities. To understand CO2 emission related to our transport we have in 2021 started the analysis of transportation and distribution. This is to actively support a reduction in CO2 emission in our value chain and from a materiality point of view an area where we can create a large impact. RE:THINK Ensuring transparency and data validity is key to us to understand and support a positive impact. We are currently conducting a scope 3 analysis as described in the section “We take 100% responsibility”. Besides focusing on our climate impact from CO2 emission we have chosen to focus on three areas. The areas are chosen from a materiality point of view. Packaging material High quality products must arrive to the customer in the same quality as they left the factory. As the main risk of damages to the products is related to transport, repacking and storage before mounting the primary purpose of our packaging is to protect the products. Working with our principles re:duce – re:use – re:think we are actively working on ﬁnding the right balance of our packaging. The balanced found by reducing the amount of mate- rial, increasing the amount of re-used material and re-thinking the way we work with packaging all together. At TCM Group we are determined that all packaging used for our own products will be recyclable by 2024. sustainable forestry As timber is the primary category of raw materials sustainable forestry is a must for us. ® TCM Group has been FSC certiﬁed since 2010 but not for the entire product assortment. During 2021 our sourcing eﬀort has been focused on securing certiﬁed sustainable forest timber and it is our clear ambition to reach 100% sustainable forestry during 2022. Chairman and CEO’s report Financial Highlights Our business Corporate governance ESG Financial statements TCM Group Annual report 2021 37 Supplier management TCM Group are committed to respect human rights 91% of materials directly used in our production is made in Europe, of which 54% originate from Denmark or our neighboring countries (DK, DE, SE). By using suppliers located close to our production sites, we also limit the CO2 emission during the transport process. 9% of the materials are produced in Asia. TCM Group management is aware that production in Asia implies risks in terms of social responsibility and supplier management, and that our stakeholders expect us to actively ensure that our suppliers are fulﬁlling regulations in terms of working conditions and environmentally friendly production. as outlined in the United Nations Universal Declaration of Human Rights and the UN Global Compact. We expect our suppliers to enforce the same high standards in their own supply chains and set out these expectations in our Code of Conduct 91% Whistleblower system of all production of direct materials to our production is made in Europe. At TCM Group we wish to encourage transparency and responsibility in everything we do. At the same time, we encourage an open culture that is based on transparency and dialogue and allows everyone to freely express themselves without the risk of retaliation. Naturally we understand and respect that some would prefer to address certain matters anonymously. For that purpose, we have 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. Many of our Danish suppliers have subsidiaries and business partners across Europe. We are therefore not only focused on the country where our business partners are located but the origin country of the supplied materials. implemented a whistleblower system. The system allows our employees to report any witnessed activities or reasonable suspicion of serious and reprehensible conditions or illegalities to the group. TCM Group Code-of-Conduct was developed and approved by the Board in 2011, and further improved in 2016. All our primary suppliers have signed our Code-of-Conduct. Production country of raw materials All TCM Group employees, customers, suppliers, advisors, and other individuals with 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 system is available on all relevant languages. In 2021 we have increased the awareness of the system internally and plan to increase The total share of TCM Group’s purchasing, covered by our Code-of-Conduct was 100% in 2021 and cover all suppliers from non-EU countries. The Covid-19 pandemic has limited us from conducting on-site audits of our suppliers in 2021. TCM Group continues to monitor all suppliers in 2022 and the aim is to intensify our audit program as well as improving our Code-of-Conduct. Sweden based on total 3% purchasing spend Denmark 23% Anti-corruption awareness to our business partners in 2022. TCM Group is exposed to the risk of non-compliance with anti-corruption rules and regulations, for example obtaining an advantage with illegal means, via our employees, suppliers, franchisees, and dealers. The consequence could be ﬁnes and brand damage. Our policy is to comply with all applicable regulations and to promote an anti-corruption behavior to all our business relations. Netherlands 3% Austria Germany 16% 0 28% In 2021 there has been no reported cases In TCM Group, no employee may receive or solicit any services, gifts or payments that may be consid- ered an attempt to obtain beneﬁts for themselves or the company. Violations of these rules will have dis- ciplinary consequences for the employees involved. Europa others 6% Asia Italy There have been no incidents violating the anti- corruption policy in 2021 9% 12% Chairman and CEO’s report Financial Highlights Our business Corporate governance ESG Financial statements TCM Group Annual report 2021 38 Revenue Reporting 71% C 31.02 G 46.15 Manufacture of kitchen furniture according to EU Taxonomy 29% Agents involved in the sale of furniture, household goods, hardware and ironmongery CAPEX 16.8% Total CAPEX vs. Capex to EU taxonomy Sustainability is always a parameter in the decision process regarding investments at TCM Group. Climate mitigation Climate adaption 7.7 Acquisition and ownership of buildings 49% 0% Buying real estate and exercising ownership of that real estate The following is a disclosure of our revenue, investment (CAPEX) and operations (OPEX) following the EU taxonomy. The disclosure is made to the best of our knowledge and covers TCM Group. Evaluation has been made based on analysis of EU taxonomy eligible criteria and an evaluation of the contribution to climate 7.3 Installation, maintenance and repair of energy efficiency equipment 51% 0% Individual renovation measures consisting in installation, maintenance or repair of energy efficiency equipment mitigation and climate adaption from a OPEX materiality point view. As the year 2021 is the ﬁrst year of following the EU Taxonomy we aim to further develop our methodology in 2022. 0.2% Total OPEX vs. OPEX to EU taxonomy Climate mitigation Climate adaption 7.3 Installation, maintenance, and repair of energy efficiency equipment 16% 0% Individual renovation measures consisting in installation, maintenance, or repair of energy efficiency equipment 9.1 Close to market research, development, and innovation 58% 0% Research, applied research and experimental development of solutions, processes, technologies, business models and other products dedicated to the reduction, avoidance, or removal of GHG emissions (RD&I) for which the ability to reduce, remove or avoid GHG emissions in the target economic activities has at least been demonstrated in a relevant environment, corresponding to at least Technology Readiness Level (TRL) 6314 9.3 Professional services related to energy performance of buildings 26% 0% Technical consultations (energy consultations, energy simulations, project management, production of energy performance contracts, dedicated trainings) linked to the improvement of energy performance of buildings; accredited energy audits and building performance assessments; energy management services; energy performance contracts; energy services provided by energy service companies (ESCOs) Chairman and CEO’s report Financial Highlights Our business Corporate governance ESG Financial statements TCM Group Annual report 2021 39 financial statements Nice Chairman and CEO’s report Financial Highlights Our business Corporate Governance ESG Financial statements TCM Group Annual report 2021 40 Consolidated financial statements 41 Income statement 41 Statement of comprehensive income Balance sheet as of 31 December Statement of changes in shareholders' equity Cash ﬂow statement 42 43 43 44 64 Notes to statement of cash ﬂows Deﬁnitions Chairman and CEO’s report Financial Highlights Our business Corporate Governance ESG Financial statements TCM Group Annual report 2021 41 income statement statement of comprehensive income DKK’000 Note 2021 2020 DKK’000 Note 2021 2020 Revenue 3 1,108,274 (853,673) 254,601 (70,097) (46,749) 0 1,024,588 (751,769) 272,819 (78,440) (54,662) 0 Net proﬁt for the year 110,709 102,243 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 750 (165) (787) 173 137,756 691 139,717 (5,000) 134,717 0 585 (615) 8 111,294 101,628 138,447 554 Share of proﬁt/loss in associated companies Financial income 9 9 338 269 Financial expenses (3,600) 135,738 (25,029) 110,709 (4,265) 130,720 (28,477) 102,243 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 11.55 11.54 10.22 10.22 Chairman and CEO’s report Financial Highlights Our business Corporate Governance ESG Financial statements TCM Group Annual report 2021 42 balance sheet as of 31 December balance sheet as of 31 December DKK’000 ASSETS Note 2021 2020 DKK’000 Note 2021 2020 SHAREHOLDERS’ EQUITY AND LIABILITIES Intangible assets 11 Goodwill 369,796 171,961 4,561 369,796 171,961 1,697 Share capital 17, 19 1,000 1,000 Brand Treasury shares 17 18 (135,976) (29) 0 Other intangible assets Value adjustments of cash ﬂow hedges Retained earnings (614) 546,318 543,454 500,292 54,404 419,691 443,987 130,000 574,373 Tangible assets Land and buildings 12 Proposed dividend for the year Total shareholders’ equity 20 85,101 11,774 87,113 11,855 Tangible assets under construction and prepayments Machinery and other technical equipment Equipment, tools, ﬁxtures and ﬁttings 42,524 6,622 27,696 6,588 Deferred tax 21 2, 22 2, 22 2 53,692 27,825 0 53,220 30,630 9,716 Mortgage loans Bank loans 146,021 133,252 Financial assets Investments in associated companies Lease liabilities Other liabilities Total long-term liabilities 15,189 1,132 24,051 24,187 141,804 13 15 47,439 8,524 0 13,239 2 Other ﬁnancial assets 97,838 55,963 748,302 13,239 Total non-current assets 689,944 Mortgage loans 2, 22 2, 22 2 2,804 160,701 11,222 2,985 2,813 9,925 10,885 0 Bank loans Inventories Lease liabilities Raw materials and consumables Products in progress Finished products 46,104 21,929 9,731 25,359 16,070 6,827 Prepayments from customers Trade payables 2 158,924 928 125,370 0 Liabilities to associated companies Other liabilities 14 77,764 48,256 2 52,227 0 55,242 9,038 213,274 929,451 Current receivables Trade receivables Other receivables Tax receivables Liabilities held for sale Total short-term liabilities Total shareholders’ equity and liabilities 27 2 28,235 31,505 6,395 24,395 23,742 5,038 389,792 907,321 15 Prepaid expenses and accrued income 16 3,235 438 69,370 11,884 0 53,611 125,855 11,785 Cash and cash equivalents Assets held for sale Total current assets Total assets 27 159,019 907,321 239,507 929,451 Chairman and CEO’s report Financial Highlights Our business Corporate Governance ESG Financial statements TCM Group Annual report 2021 43 statement of Changes in shareholders’ equity cash flow statement Value DKK’000 Note 2021 2020 adjustments Operating activities Operating proﬁt Share capital Treasury of currency Retained earnings Proposed dividend 138,447 16,918 134,717 21,341 DKK’000 shares hedges Total Depreciation/amortization Other non-cash operating items related to the merge of the e-commerce activities Opening balance 01.01.2021 (17,342) (25,899) (29,508) (13,944) 5,132 0 (31,156) (9,555) (4,855) 21,759 1,000 0 (614) 443,987 130,000 574,373 Income tax paid Net proﬁt for the year Change in inventories 0 0 0 0 56,305 54,404 110,709 Change in operating receivables Change in operating liabilities Cash ﬂow from operating activities Other comprehensive income for the year 73,804 132,251 0 585 0 0 585 Total comprehensive Investing activities income for the year 0 0 585 56,305 54,404 111,294 Investments in tangible assets Investments in intangible assets Sale of ﬁnancial assets (29,168) (4,466) (308) (30,993) (202) (8) Dividend paid 0 0 0 0 (130,000) (130,000) Purchase of treasury shares 0 (135,976) 0 0 0 (135,976) Acquisition of operations 24 (23,200) 4,600 0 Divestments of operations 0 Closing balance 31.12.2021 1,000 (135,976) (29) 500,292 54,404 419,691 Cash ﬂow from investing activities Operating cash ﬂow before acquisitions of operations Operating cash ﬂow after acquisitions of operations (52,542) 44,462 21,262 (31,203) 101,048 101,048 Opening balance 01.01.2020 Financing activities 1,000 0 0 0 0 0 0 419,244 52,500 52,500 (52,500) 130,000 472,744 0 Interest paid (2,897) 137,878 (3,263) (100,294) (5,168) 0 Reversed proposed dividend Proceeds and repayments of loans Repayments of lease liabilities Purchase of treasury shares Dividend paid 25 25 0 0 (4,237) Net proﬁt for the year (135,976) (130,000) (135,232) (113,971) (27,757) 102,243 0 Other comprehensive income for the year Cash ﬂow from ﬁnancing activities Cash ﬂow for the year (108,725) (7,677) 0 0 (614) 0 0 (614) Total Cash and cash equivalents at the beginning of the year Divestments of operations 131,683 (5,828) (113,971) 11,884 139,360 0 comprehensive income for the year 0 0 (614) (27,757) 130,000 101,629 Cash ﬂow for the year (7,677) 131,683 Dividend paid 0 0 0 0 0 0 Cash and cash equivalents at year-end Closing balance 31.12.2020 1,000 0 (614) 443,987 130,000 574,373 Specification: Cash and cash equivalents at year-end 11,884 0 125,855 5,828 * At the general meeting on 11 June 2020, it was concluded that no dividend were to be distributed regarding the ﬁnancial year 2019. Cash and cash equivalents assets held for sale 11,884 131,683 Chairman and CEO’s report Financial Highlights Our business Corporate Governance ESG Financial statements TCM Group Annual report 2021 44 notes to the consolidated financial statements 1. 2. Accounting policies ........................................................................................................................... 45 Financial risks .................................................................................................................................. 50 Revenue and segment information ......................................................................................................52 Staﬀ costs .........................................................................................................................................52 Average number of employees during the period...................................................................................53 Audit fee ...........................................................................................................................................53 Depreciation/amortization and impairment by function ....................................................................... 54 Non-recurring items......................................................................................................................... 54 Financial income and expenses .......................................................................................................... 54 Corporation tax..................................................................................................................................55 Intangible assets................................................................................................................................55 Tangible assets ................................................................................................................................. 56 Investments in associated companies ..................................................................................................58 Inventories........................................................................................................................................58 Other ﬁnancial assets and other receivables .........................................................................................58 Prepaid expenses and accrued income................................................................................................. 59 Share capital..................................................................................................................................... 59 Value adjustments of cash-ﬂow hedges .............................................................................................. 59 Earnings per share ............................................................................................................................ 60 Dividend........................................................................................................................................... 60 Deferred tax...................................................................................................................................... 60 Bank loans and mortgage loans...........................................................................................................61 Financial assets and liabilities.............................................................................................................61 Acquisition of operations (business compinations)................................................................................61 Changes in liabilities attributable to the ﬁnancing activities ................................................................. 62 Pledged assets, contingent liabilities and commitments ....................................................................... 62 Assets and liabilities held for sale....................................................................................................... 63 Related party transactions ................................................................................................................. 63 Events after the balance sheet date..................................................................................................... 63 Companies in the TCM Group............................................................................................................. 63 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. Chairman and CEO’s report Financial Highlights Our business Corporate Governance ESG Financial statements TCM Group Annual report 2021 45 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. which includes an XHTML ﬁle that may be opened using standard web browsers, and a number of techni- cal XBRL ﬁles enabling mechanical retrieval of the XBRL data incorporated. Impairment testing of goodwill and brand The borrowing rate is set at the transition date for Goodwill and brand with indeﬁnite useful life are rec- ognized at cost less any accumulated impairment. The Group regularly and at least annually performs impair- ment tests of goodwill and brand in accordance with the accounting policies. The assumptions and assess- ments made pertaining to expected cash ﬂows and the discount rate in the form of weighted average cost of capital are described in note 11, Intangible assets. IFRS 16. If the company considers that a change in the residual value guarantee, termination and renewal options, the incremental borrowing rate is revised. General principles 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 assessments, collateral, leasing periods, etc. Assets and liabilities are recognised at historic acqui- sition 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. Accounting policies are unchanged compared to last year except for recognition of derivative instruments. Reporting under the ESEF Regulation Signiﬁcant accounting estimates and judgements related to IFRS 16 For rental contracts for premises, the possibility of using mortgage ﬁnancing of real estate has been taken into account. The Commission Delegated Regulation (EU) 2019/815 on the European Single Electronic Format (ESEF Regu- lation) requires the use of a particular electronic reporting format for annual reports of listed compa- nies in the EU. More speciﬁcally, the ESEF Regulation requires the annual report to be prepared in XHTML format with iXBRL tagging of the statement of com- prehensive income, balance sheet, cash ﬂow statement and statement of changes in equity in the consolidated ﬁnancial statements. 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 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 otherwise stated. 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 consoli- dated ﬁnancial statements. 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 ter- mination options when determining the lease term. For both production buildings and retail leases, the lease term is estimated to be 5 years. There are no amendments to accounting policies with future application that are deemed to have any mate- rial 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 assump- tions are regularly reviewed. Changes to estimates are recognized in the period in which the change is made if the change aﬀects only that period, or in the period in which the change is made and future periods if the change aﬀects both current periods and future periods. Assessments made by Management in the application of IFRS that have a material impact on the consoli- dated ﬁnancial statements and estimates made that may lead to signiﬁcant adjustments in the consoli- dated ﬁnancial statements of future ﬁnancial years are primarily the following: 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 tax- onomy published by the IFRS Foundation. The 2020 version of the ESEF taxonomy has been used in the annual report for 2021. 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 comprise 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 com- prise short-term liabilities. 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 recoqnized as a ‘Other receiveables’ in the balance sheet. The line items in the consolidated ﬁnancial statements are XBRL-tagged to the elements of the ESEF taxon- omy 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 extensions to the taxonomy have been incorporated. Except for subtotals, these extensions are anchored to standard elements of the ESEF taxonomy. Incremental borrowing rate The company has chosen to subdivide their leases into the following categories: Assets and liabilities held for sale • Rental contracts for premises • Vehicles Assets and liabilities classiﬁed as held for sale com- prise assets and liabilities for which it is highly proba- ble that the value will be recovered through a sale within 12 months rather than through continued use. Consistently with the requirements of the ESEF Regu- lation, the annual report approved by Management is comprised of a ZIP ﬁle TCM-Group-2021-12-31-en.zip Chairman and CEO’s report Financial Highlights Our business Corporate Governance ESG Financial statements TCM Group Annual report 2021 46 Notes to the consolidated financial statements (continued) 1. Accounting policies (continued) Assets and lialitities classiﬁed as held for sale are measured at the carrying amount at the classiﬁcation date as “held for sale” or at market value less selling costs if lower. The carrying amount is measured in accordance with the Group’s accounting policies. No depreciation is recorded on property from the time when they are classiﬁed as “held for sale”. Impair- ment losses arising on ﬁrst classiﬁcation as “held for sale” and gains and losses from the subsequent meas- urement are recognized in the income statement. Business combinations and the non-controlling interest, without any remeas- tions and related supply chain disrubtions. Such costs are non-recurring in nature. 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. urement of the subsidiary’s net assets. Segment reporting Operating expenses 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 compa- ny’s chief operating decision-maker to evaluate them and to allocate resources to the operating segment. TCM Group A/S has only one operating segment that is producing and selling kitchens, bathrooms and storage. Operating expenses primarily comprise marketing costs, administrative expenses and other operating costs including staﬀ costs related to sales, marketing and administrative personnel. 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. Consolidation principles and business combinations 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 recog- nized directly in net proﬁt for the year. 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 compa- ny’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. Financial income and expenses Revenue recognition 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. Revenue is recognised when control of goods sold has transferred to the customer, being when the goods have been delivered according to the delivery terms. When the Group provides installation services, revenue is recognised as a performance obligation satisﬁed over time. Revenue is recognised for these installation services based on the stage of completion of the con- tract. Sales are recognized net after VAT and discounts. Contingent consideration in acquisitions is measured at fair value on both the acquisition date and continu- ously thereafter, with changes in value recognized in proﬁt or loss. Interest income on receivables and interest expense on liabilities are calculated in accordance with the eﬀec- tive 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-in- terest 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. 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. 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 princi- ple is decided individually for each acquisition. 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, impairment charges in connection with e.g. material restructuring and other items relating to fundamental reorganisations 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 precau- 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. 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. 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 recog- nized in other comprehensive income or in sharehold- ers’ equity, whereby the associated tax eﬀects are rec- ognized in other comprehensive income or in shareholders’ equity. 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 compa- nies, are eliminated in their entirety in the preparation of the consolidated ﬁnancial statements. When controlling interests are achieved, changes in ownership are recognized as a reallocation of share- holders’ equity between the parent company’s owners Chairman and CEO’s report Financial Highlights Our business Corporate Governance ESG Financial statements TCM Group Annual report 2021 47 Notes to the consolidated financial statements (continued) 1. Accounting policies (continued) Current tax is tax that is to be paid or received regard- ing the current year, by applying the tax rates deter- mined or that have been determined in principle on the balance sheet date. This item also includes adjust- ments to current tax attributable to previous periods. In the income statement, operating proﬁt is charged with straight-line depreciation, which is calculated on the original cost less estimated residual value after useful life and is based on the estimated useful lives of the assets as follows: ing to the straight-line method based on the estimated useful life of the asset (three to ﬁve years). 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. Research and product development Costs for product development are expensed immedi- ately as and when they arise. Deferred tax is calculated according to the balance-sheet method on all temporary diﬀerences arising between recognized and ﬁscal values of assets and liabilities. Buildings 36–40 years Machinery and other technical equipment 3-10 years Product development within the Group is mainly in the form of design development and is conducted continu- ously to adapt to current style trends. This develop- ment is relatively fast, which is the reason that no portion of the costs for product development is recog- nized 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 consid- ered a single leasing payment. Equipment, tools, ﬁxtures and ﬁttings Land is not depreciated. 2-7 years The tax eﬀect attributable to tax loss carryforwards that could be utilized against future proﬁts is capital- ized as a deferred tax asset. This applies to both accu- mulated loss carryforwards at the acquisition date and losses arising thereafter. Expected useful lives and residual values are reviewed annually. Intangible assets 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. 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 operations, goodwill is allocated to cash generating units. In connection with acquisitions the fair value of the diﬀerent brands have been measured respectively. Since goodwill and brand have an indeﬁnite useful life, it is not amortized. The indeﬁnite useful life is justi- ﬁed 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 either annually or when an indication 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. Deferred tax is measered at the tax rates that are expected to apply to the period when the asset is real- ised or the liability is settled. Deferred tax is recog- nized in the balance sheet as a non-current asset or long-term liability. The income tax liability is recog- nized as a current receivable or current liability. Leases When entering into an agreement, the company assesses whether an agreement is a lease agreement or contains a lease element. A lease is an agreement that transfers the right to control the use of an identiﬁable asset for a period against payment. In assessing whether an agreement contains a lease item that has been transferred to the lessee, it is necessary to con- sider whether the lessee has the right, during the use- ful life, to obtain virtually all the economic beneﬁts from the use of the identiﬁable asset and the right to decide on the use of the the identiﬁable asset. The lease obligation, which is recognized under “Lease liabilities”, is measured at the present value of the remaining lease payments, discounted by the compa- ny’s incremental loan interest rate, if the implicit interest rate is not stated in the lease agreement or can reasonably be determined. The leasing payment consist of ﬁxed and variable leasing payments that are regulated by index or interest rate, guaranteed residual values, the exercise of purchase options and the cost of cancelling the lease. The lease obligation is subse- quently adjusted if: If the actual outcome diﬀers from the amounts ﬁrst recognized, the diﬀerences will aﬀect current tax and deferred tax in the period in which these calculations are made. 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. 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 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 right-of-use asset is measured at cost, which is calculated 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. Other intangible assets with deﬁnite useful life are recognized at cost less accumulated amortization and any impairment. It also includes capitalized costs for purchases and internal and external costs for the development of software for the Group’s IT operations, patents and licenses. Amortization takes place accord- • 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. 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. • The contract is renegotiated or modiﬁed. Chairman and CEO’s report Financial Highlights Our business Corporate Governance ESG Financial statements TCM Group Annual report 2021 48 Notes to the consolidated financial statements (continued) 1. Accounting policies (continued) Recognition in and derecognition from the balance sheet Transaction costs for derivative instruments are immediately expensed. On initial recognition, a ﬁnan- cial instrument is classiﬁed on the basis of the pur- pose underlying the acquisition of the instrument. This classiﬁcation determines how the ﬁnancial instrument is measured after initial recognition, in the manner described below. For the recognition of deriv- ative instruments, refer to cash-ﬂow hedges below. for derivative instruments with negative values) are measured at amortized cost. Subsequent adjustment of the lease obligation is rec- ognized 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. A ﬁnancial asset or a ﬁnancial liability is entered in the balance sheet when the company becomes a party in accordance with the contractual terms of the instru- ment. A receivable is recognized when the company has performed a service and a contractual payment obliga- tion 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. 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. Inter- est rate swaps are measured at fair value in the bal- ance sheet. The interest coupon portion is continu- ously recognized in proﬁt or loss as a portion of interest expense. Unrealized changes in fair value of interest rate swaps are recognized in other compre- hensive 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 ineﬀective portion of unreal- ized changes in value of interest rate swaps is recog- nized in proﬁt or loss. Investments in associated companies Investments in associates are measured using the equity method, whereby the investments in the bal- ance sheet are measured at the proportionate share of the companies’ net asset value calculated in accord- ance with the Group’s accounting policy after elimina- tion of the proportionate share of unrealized internal proﬁt/loss and with addition of value added on acqui- sition, including goodwill. Receivables and liabilities in foreign currencies Receivables and liabilities in foreign currencies are val- ued at the balance sheet date rate. Exchange rate ﬂuc- tuations pertaining to operating receivables and liabili- ties are recognized in operating proﬁt, while exchange rate ﬂuctuations pertaining to ﬁnancial receivables and liabilities are recognized in net ﬁnancial items. A ﬁnancial asset is derecognized from the balance sheet when the rights resulting from the agreement have been realized, expire or the company loses con- trol over them. The same applies to a part of a ﬁnan- cial asset. A ﬁnancial 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. Investments in associates are testet for impairment annualy. 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 receivables 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 provi- sions for decreases in value. Receivables with short maturities are not discounted. 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 bal- ance sheet date. The net sales value comprises the estimated sales price in the ongoing operations less selling expenses. Cost of ﬁnished and semi-manufac- tured products are measured at manufacturing cost including raw materials, direct labour, other direct expenses and production related overheads based on normal production. 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. A ﬁnancial asset and a ﬁnancial liability may only be oﬀset against each other and recognized net in the balance 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. 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. Inter-group proﬁts on inventory is eliminated in the consolidated ﬁnancial statements. The acquisition or divestment of ﬁnancial assets is recognized on the date of transaction for on demand transactions, which is the date when the company undertakes to acquire or sell the asset. Cash and cash equivalents Cash and cash equivalents are deﬁned as cash and bank balances and short-term investments with maturities not exceeding three months from the acquisition date. Impairment The carrying amounts of the Group’s assets are tested annually for indications of any impairment require- ment. 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. 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. Measurement Financial instruments that are not derivative instru- ments are initially recognized at cost corresponding to the instrument’s fair value plus transaction costs. Financial liabilities All transactions pertaining to ﬁnancial liabilities are recognized on the settlement date. Liabilities (except Chairman and CEO’s report Financial Highlights Our business Corporate Governance ESG Financial statements TCM Group Annual report 2021 49 Notes to the consolidated financial statements (continued) 1. Accounting policies (continued) 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 accordance with IAS 36 (see below). For goodwill and assets with indeﬁnite life e.g. brand, the recoverable amount is 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 essen- tially independent cash ﬂows, known as cash generat- ing units. Receivables, for which the Group has no reasonable expectation of recovery, are written oﬀ in part or entirely. Shareholders’ equity of interest-bearing debt, interest and payment of divi- Dividends dends to shareholders. Dividends are recognized as a liability after the Annual General Meeting has approved the dividend. Earnings per share The allowances for expected credit losses and write- oﬀs for trade receivables are recognised in proﬁt or loss and included in administrative expenses. The calculation of earnings per share is based on con- solidated 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 includ- ing employee share options. The options are dilutive if the exercise price is lower than the share price. Dilu- tion is greater, the greater the diﬀerence between the exercise price and the share price. For the options, the exercise price is added the value of future services. Treasury shares The treasury share reserve comprises cost of acquisi- tion for the Group’s portfolio of treasury shares. Divi- dends 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. 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 calculation 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 impair- ment had been posted. 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 generat- ing unit are primarily allocated to goodwill. Subse- quently, a proportional impairment of other assets included in the unit (group of units) is eﬀected. 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. 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 cash ﬂow eﬀect of acquisitions and disposals of businesses is shown separately in cash ﬂows from investing activities. Cash ﬂows from acquired busi- nesses 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. 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). An impairment loss on loans and trade receivable rec- ognized at amortized cost is reversed if the previous reasons for the impairment loss no longer exist and full payment can be expected to be received from the customer. The Group have a Long-term Incentive program (LTI) for the Executive Management, which is governed by the Remuneration policy. A provision is recognized for the anticipated cost of LTI bonus payments when the Group has a current legal or contractive obligation to make such payments, based on the conditions in the Remuneration policy. 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. Contingent liabilities Impairment testing of ﬁnancial assets 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 possible to suﬃciently reliably estimate the amount concerned. Trade receivables are recognised initially at their transaction price less allowance for expected credit losses over the lifetime of the receivable and are sub- sequently measured at amortised cost adjusted for changes in expected credit losses. The expected credit losses on trade receivables are estimated using a pro- vision matrix with reference to past default experience of the debtors, adjusted for expected changes in defaults in the future based on forward looking infor- mation, if relevant. The Group has historically experi- enced insigniﬁcant credit losses. Cash ﬂows from investing activities comprise pay- ments in connection with acquisitions and disposals of entities and operations and of intangible and tangible assets and other non-current assets as well as divi- dend received. 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. 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 Chairman and CEO’s report Financial Highlights Our business Corporate Governance ESG Financial statements TCM Group Annual report 2021 50 Notes to the consolidated financial statements (continued) 2. Financial risks Foreign exchange risk Credit risk Changes in impairment of trade receivables in 2021 amounted to DKK 0.1 million and is recognized as an expence in the income statement 2021. level of 1% p.a. relative to the actual interest rates TCM Group A/S has limited currency exposure and risk, entirely related to sales in NOK, where hedging was applied. Other revenue was in DKK and purchases were primarily in DKK and EUR. Due to the current DKK-EUR ﬁxing, purchases were not hedged. Purchase in other currencies were DKK 4 million in 2021 (DKK 3 million). 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 customers who make regular purchases. Credit insur- ance, bank guarantees and other collateral are utilized for the diﬀerent markets and customer categories. would have a negative impact on the proﬁt for the year and on equity at 31 December 2021 of DKK 1.8 million (positive DKK 0.7 million). Actual losses on debtors in 2021 and 2020 have been immaterial in relation to the size of the Group and its activities, and no material losses are expected in 2022, why no further provisions have been made for 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 2021. No adjustments have been made for instalments, raising of loans, etc. during the course of the year. expected losses. The provision of DKK 1.1 million con- stitutes 0.1% of net revenue for the year, which is considered suﬃcient to cover future expected losses. Translation exposure The Group does not have any subsidiaries in foreign countries, why there is currently no translation exposure. Financial exposure The computed expected ﬂuctuations are based on the current market situation and expectations for the market developments in the interest rate level. The Group has signed a new ﬁnance agreement with Nykredit Bank comprising a committed facility of DKK 200 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. Age analysis, trade receivable 2021 2020 Capital management DKK’000 DKK’000 The Group targets a leverage ratio of max 2.25 x EBITDA. However, if acquisition opportunities arise, the Company may deviate from this policy. The lever- age ratio as of 31 December 2021 is 1.33. Bank loans in Nordea with a nominal amount of DKK 20 million as of 31 December 2020 was repaid in 2021. Trade receivables 28,235 22,411 1,902 1,015 24,395 20,063 3,511 860 Non-due trade receivable Past due trade receivable 0-30 days Past due trade receivable 30-90 days Past due trade receivable >90 days Total overdue The bank loans contain covenants. There has been no breach of any covenant during the period. The interest rates on the bank loans are variable. The Board of Directors has adopted a dividend policy with a target payout ratio of 40-60 percent of consoli- dated net proﬁt for the year. The Board of Directors recommends to the Annual General Meeting to distrib- ute an ordinary dividend of DKK 6 per share. Exclud- ing treasury shares this corresponds to DKK 54 mil- lion. Furthermore, to provide a mandate to the Board of Directors with the option to distribute an extraordi- nary dividend during 2022 in the range DKK 25-75 million. 3,968 6,886 3,046 0 937 Mortgage loans with a nominal amount of DKK 31 million (DKK 33 million) are amortised over 20 years and expire in 2032. The interest rates of mortgage loans are variable. 5,308 3,043 0 Of which secured – Impaired Of which unsecured 3,840 (1,061) 2,779 2,265 (977) 4,331 Interest-rate risk – Impaired It is group policy to fully or partially hedge interest rate risks on loans when it is assessed that the debt is material. The group manages interest rate risk by maintaining an appropriate mix between ﬁxed and ﬂoating rate borrowings, and by use of interest rate swap contracts. Total overdue after impairment 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). Impairment loss recognized in the income statement during the period 25 683 Trade receivables as of 1 January 2020 amounted to DKK 22.3 million. For the Group’s ﬂoating rate cash and cash equiva- lents and debt to banks, an increase in interest rate Chairman and CEO’s report Financial Highlights Our business Corporate Governance ESG Financial statements TCM Group Annual report 2021 51 Notes to the consolidated financial statements (continued) 2. Financial risks (continued) 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 similar assets or liabilities or other valuation methods where all signiﬁcant inputs are based on observable market data (level 2) Liquidity risk comprised DKK 51 million (DKK 139 million and DKK 75 million in unutilised overdraft facilities) as of 31 December 2021. Liquidity is controlled centrally with the aim of using available liquidity eﬃciently, at the same time keeping necessary reserves are available. Available liquidity • Quoted prices in an active market for identical instruments (level 1) • Valuation methods in which any signiﬁcant input is not based on observable marked data (level 3) Maturity structure, ﬁnancial and operational liabilities – undiscounted cash ﬂows Nominal amount, functional currency 5 years or later Carrying amount of derivative financial instruments: 2021 2020 0-6 months 6-12 months 1-5 years DKK’000 DKK’000 DKK million 2021 Total Hedging – currency ﬂuctuation (37) (787) Bank loans 160.7 30.6 26.4 158.9 53.4 1.0 1.0 163.3 11.9 15.3 0.0 0.0 165.4 32.4 (37) (787) Mortgage loans Lease liabilities Trade payables Other liabilities 1.5 5.8 1.5 5.7 0.0 2.2 17.5 0.0 0.0 0.0 26.8 158.9 53.4 During the ﬁnancial period, the Group had no ﬁnancial instruments in level 1 or 3. The fair value of ﬁnancial assets and ﬁnancial liabili- ties 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. 158.9 50.1 1.1 Financial and operational liabilities at 31 December 2021 217.3 10.4 191.7 17.5 436.9 Nominal amount, functional currency 5 years or later 0-6 months 6-12 months 1-5 years DKK million Total 2020 Bank loans 19.6 33.4 5.1 1.5 5.1 1.5 10.2 11.9 24.3 0.0 0.0 20.4 0.0 20.4 35.4 35.2 Mortgage loans Lease liabilities Trade payables Other liabilities 35.0 125.4 79.4 5.5 5.3 0.0 2.9 125.4 52.3 0.0 125.4 79.4 24.2 0.0 Financial and operational liabilities at 31 December 2020 189.9 14.8 70.7 23.4 295.8 Chairman and CEO’s report Financial Highlights Our business Corporate Governance ESG Financial statements TCM Group Annual report 2021 52 Notes to the consolidated financial statements (continued) 3. Revenue and segment information 4. Staff Costs Total costs for employee benefits DKK’000 The Group’s business activities are managed within a single operating segment that is producing and selling kitchens, bathrooms and storage. Kitchens and related products cover products for kitchen. The result of the operating segment is monitored by the Group’s man- agement to evaluate it and to allocate resources. 2021 2020 Salaries and other remuneration Social security costs 206,347 5,806 194,433 4,811 Revenue Intangible Revenue Intangible from and tangible from and tangible Pension costs – deﬁned contribution plans Other staﬀ costs 25,328 210 23,585 168 customers 2021 assets 2021 customers assets 2020 DKK’000 2020 Total costs for employees 237,691 222,998 Geographic areas The average number of employees and number of men and women among Board members and Executive Manage- Denmark 1,011,380 96,894 692,339 0 941,584 83,004 676,705 0 ment are described in note 5. Other countries 1,108,274 692,339 1,024,588 676,705 Remuneration and other benefits Base salary, Variable Revenue consists of sale of goods and services. Directors remunera- Other benefits Pension costs Number of Total individuals DKK’000 fees tion 2021 Board of Directors Executive Management Total 2,188 4,567 6,755 0 10 0 2,198 5,929 8,127 5 377 602 383 2 377 612 383 7 Base salary, Variable Directors remunera- Other benefits Pension costs Number of Total individuals DKK’000 fees tion 2020 Board of Directors Executive Management Total 2,188 4,536 6,724 0 16 344 360 0 481 481 2,204 7,365 9,569 5 2,004 2 2,004 7 Chairman and CEO’s report Financial Highlights Our business Corporate Governance ESG Financial statements TCM Group Annual report 2021 53 Notes to the consolidated financial statements (continued) 4. Staff Costs (continued) 5. Average number of employees during the period Employees including the Board of Directors and Exec- utive Management have the opportunity to buy kitch- ens, bathrooms and storage at a discounted price. The purchases are done indirectly through an independent store. The total value of the purchases made by the Board of Directors and Executive Management was DKK 2 thousand (DKK 173 thousand) during the year. 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 2021 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 perfor- mance on other KPIs. The EBITDA achieved in 2021 did not exceed the threshold, and therefore no STI bonus is to be paid for the ﬁnancial year 2021. 2021 2020 Average number of employees 504 483 Board members 5 1 5 1 Of which women The remuneration report for the Board of Directors and the Executive Management is avarable on TCM Group´s website. Executive Management Of which women 2 0 2 0 Board of Directors The Board of Directors consists of 5 members in total at the date of approval of these consolidated ﬁnancial statements. Remuneration to members of the Board of Directors is determined by resolutions taken at the Annual General Meeting. The LTI is applicable for the period 2021-2023 and consists of annually commencing individual Perfor- mance Share Unit Plans. At the end of the 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 LTI is capped at 50% of the annual basic salary for 2021, and corresponding to a total number of shares in TCM Group of 15,989. 6. Audit fee Executive Management Executive Management, which in 2021 in average totals 2 individuals, received salaries and beneﬁts dur- ing the ﬁscal year amounting to DKK 4.6 million plus variable salary portions based on results for 2021 of DKK 0.4 million. In addition to statutory audit, Deloitte Statsautoriseret Revisionspartnerselskab, the auditors appointed at the Annual General Meeting, provides other assurance engagements and other services to the Group. DKK’000 2021 2020 Specification by type of costs Statutory audit 595 65 595 0 The LTI program for 2021-2023 is to be paid out in 2024 depending on the performance on the above mentioned criterias. Other assurance engagements Tax and indirect taxes advisory Other services 30 5 73 13 The expected vesting level is depending on the perfor- mance in the future ﬁnancial years, and at the time of issuance the expected vesting level of the maximum LTI amount for Executive Management for 2021 was set to be approximately corresponding to a granted value of 50% of the maximum LTI amount. 763 612 The fee for non-audit services delivered by Deloitte Statsautoriseret Revisionspartnerselskab to the Company amounted to DKK 0.2 million in 2021 and consisted of various services. In 2020, the fee for non-audit services delivered by Deloitte Statsautoriseret Revisionspartnerselskab to the Company amounted to DKK 0.0 million. Chairman and CEO’s report Financial Highlights Our business Corporate Governance ESG Financial statements TCM Group Annual report 2021 54 Notes to the consolidated financial statements (continued) 7. Depreciation/amortization and impairment by function 9. Financial income and expenses DKK’000 2021 2020 Depreciation/ amortization 2021 Depreciation/ Impairment amortization Impairment 2020 Financial income DKK’000 2021 2020 Interest income on ﬁnancial assets measured at amortized costs Interest income on discounted subleases Financial expenses 149 189 54 215 Cost of goods sold Selling expenses 12,562 1,060 3,296 0 9,489 1,203 0 0 0 0 0 Administrative expenses 10,649 Interest expense on liabilities measured at amortized costs Interest expenses on discounted lease liabilities Total (3,220) (380) (3,840) (425) Total depreciation/amortization and impairment 16,918 0 21,340 0 (3,262) (3,996) 8. Non-recurring items DKK’000 2021 2020 Costs related to Covid-19 and supply chain disruptions Restructuring 14,010 1,300 5,000 0 0 Net gain from the Celebert/kitchn.dk transaction Gain from the divestment of an own operated store Total (13,503) (2,498) (691) 0 5,000 Below is how the income statement (extract) would have been presented if there were not adjusted for non-recurring items: DKK’000 2021 2020 Revenue 1,108,274 (869,583) 238,691 (71,675) (48,536) 19,966 1,024,588 (756,769) 267,819 (78,440) (54,662) 0 Cost of goods sold Gross profit Selling expenses Administrative expenses Other operating income Operating proﬁt 138,447 134,717 Chairman and CEO’s report Financial Highlights Our business Corporate Governance ESG Financial statements TCM Group Annual report 2021 55 Notes to the consolidated financial statements (continued) 10. Corporation tax 11. Intangible assets Other Total DKK’000 2021 2020 comprehen- sive comprehen- sive Income statement Goodwill DKK’000 income income Opening carrying amount 369,796 369,796 Closing carrying amount 369,796 369,796 Tax for the year can be specified as follows: Current tax 24,557 472 165 0 24,722 472 Brand Change in deferred tax during the year Opening carrying amount 171,961 171,961 Total 25,029 165 25,194 Closing carrying amount 171,961 171,961 Tax for the previus year can be specified as follows: Current tax 28,774 (296) (173) 0 28,601 (296) Impairment testing of goodwill and brand At the end of 2021, 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). tions regarding market trends in the years ahead, Change in deferred tax during the year which reﬂects previous experience. Total 28,477 (173) 28,304 When calculating the expected cash ﬂow, signiﬁcant assumptions applied include expected demand, growth in net sales, operating margin and working capital requirements. 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 strate- gic 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. Reconciliation of the eﬀective tax rate for the period can be speciﬁed as follows: DKK’000 % 2021 % 2020 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 “Producing and selling kitchens, bathrooms and stor- age”, hence the acquired goodwill has been allocated here to. Tax rate 22.0 (3.3) 0.2 29,816 (4,468) 293 22.0 0.0 28,760 0 Non-taxable income Non-deductible expenses Other 0.0 40 (0.5) 18.5 (612) (0.2) 21.8 (322) 28,477 Goodwill and brand are subject to an annual impair- ment test by calculating the expected recoverable amount of the CGU. The recoverable amount is calcu- lated as the expected cash ﬂow discounted by a weighted average cost of capital (WACC) after tax for the CGU. The recoverable amount, calculated in con- junction with this, is compared with the carrying amount, including goodwill and brand, 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 expecta- Eﬀective tax rate for the year 25,029 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 shareholders’ equity is determined on the basis of the assumption that all investors require at least the same level of return as for risk-free government bonds, with an additional risk premium for the esti- mated risks assumed when they invest in cash gener- ating units. The risk premium has been established Chairman and CEO’s report Financial Highlights Our business Corporate Governance ESG Financial statements TCM Group Annual report 2021 56 Notes to the consolidated financial statements (continued) 11. Intangible assets (continued) 12. Tangible assets Tangible based on the long-term historical return on the stock market for large companies in similar industries by taking into consideration the risk proﬁle of the busi- ness unit. The required return on debt ﬁnanced capital is also calculated on the return on risk-free govern- ment bonds and by applying a borrowing margin based on an estimated company-speciﬁc risk. The current tax rate of 22% is applied. In 2021, the Group’s weighted cost of capital before tax amounted to 8.6% (8.4%) and after tax to 6.7% (6.6%). Land and assets under Machinery Equipment, land construction and other improve- and technical ments prepayments equipment and fittings tools, Testing of goodwill and brand did not lead to any impairment in 2021 or 2020. In management’s assess- ment, likely changes in the basic assumptions will not lead to the carrying amount exceeding the recoverable amount. fixtures DKK’000 Buildings Opening cost at 1 January 2021 Investments for the period Transfer 95,002 5,023 160 6,833 155 0 11,855 11,575 (11,657) 0 33,286 11,326 11,497 (89) 13,700 4,273 0 Other intangible assets DKK’000 Disposals for the period (5,215) 0 (2,726) 2021 2020 Closing cost amount at 31 December 2021 94,971 6,988 11,773 56,020 15,247 Opening cost 49,624 4,465 (336) 49,422 0 Opening depreciation and impairment at 1 January 2021 14,722 (2,097) 4,232 0 0 0 0 0 0 5,590 (89) 7,112 (1,780) 3,292 Investments for the period Disposals for the period Closing accumulated cost Disposals for the period 202 Depreciation for the period 7,994 53,753 49,624 Closing depreciation and impairment at 31 December 2021 Opening amortization 47,927 1,400 40,173 0 16,858 78,113 0 0 13,496 42,524 8,625 6,622 Amortization for the period Disposals for the period Closing carrying amount at 31 December 2021 6,988 11,773 (134) 7,754 47,927 Closing accumulated amortization 49,193 Of which right-of-use assets Closing carrying amount Of which: Opening carrying amount at 1 January 2021 13,315 0 2,129 1,832 Investment for the period Disposals for the period Depreciation for the period Software 4,561 0 437 1,260 1,697 (3,118) (2,410) (631) Franchise set-up Closing carrying amount (1,450) 4,561 Closing carring amount at 31 December 2021 7,788 1,879 Chairman and CEO’s report Financial Highlights Our business Corporate Governance ESG Financial statements TCM Group Annual report 2021 57 Notes to the consolidated financial statements (continued) 12. Tangible assets (continued) Tangible DKK’000 2021 Land and assets under Machinery Equipment, Amounts recognized in the income statement land construction and other improve- and technical ments prepayments equipment and fittings tools, fixtures Cost of short term leases 891 DKK’000 Of which right-of-use assets Buildings Variable leasing costs that are not included in leasing liabilities 152 Opening carrying amount at 1 January 2020 1,043 13,699 3,024 0 1,774 1,919 Investment for the period Disposals for the period Depreciation for the period Tangible (26) Land and assets under Machinery Equipment, (3,408) (1,538) land construction and other improve- and technical tools, fixtures Closing carring ammount at 31 December 2020 13,315 2,129 DKK’000 Buildings ments prepayments equipment and fittings 2020 Opening cost at 1 January 2020 Investments for the period 89,195 6,833 0 33,112 13,373 (13,199) 0 11,042 4,875 Amounts recognized in the income statement 5,806 0 0 0 11,855 Variable leasing costs that are not included in leasing liabilities Disposals for the period 0 0 0 0 (763) 26 Reclassiﬁcation to assets held for sale (1,454) Cost of leases that expire within 12 months 352 Closing cost amount at 31 December 2020 95,002 6,833 11,855 33,286 13,700 378 Opening depreciation and impairment at 1 January 2020 9,557 0 0 0 0 0 0 0 0 0 13,731 (13,199) 5,059 0 5,899 (735) No impairment was charged to tangible assets in 2021 or 2020. Disposals for the period Depreciation for the period Reclassiﬁcation to assets held for sale 5,164 0 3,364 (1,415) Closing depreciation and impairment at 31 December 2020 14,722 80,280 0 0 5,590 7,112 Closing carrying amount at 31 December 2020 6,833 11,855 27,696 6,588 Chairman and CEO’s report Financial Highlights Our business Corporate Governance ESG Financial statements TCM Group Annual report 2021 58 Notes to the consolidated financial statements (continued) 13. Investments in associated companies 15. Other financial assets and other receivables DKK’000 2021 2020 DKK’000 2021 2020 Cost at start of year Additions 0 0 Other financial assets Subleases 61,178 0 7,559 965 12,543 695 Carrying amount at end of year 61,178 0 Deposits Total 8,524 13,239 Value adjustments at start of year Dividend received 0 (14,292) 554 0 0 0 0 Other receivables Subleases Share of proﬁt/(loss) 7,120 24,384 31,505 5,888 17,854 23,742 Value adjustments at end of year (13,740) Other receivables Total Carrying amount as at end of year 47,439 0 Subleases are speciﬁed as follows: The associated company Celebert ApS has balance sheet date as at 30 June. 2021 2020 At the end of 2021, recognized goodwill related to associated companies amounted to DKK 45.6 million (DKK 0.0 million). No impairment was charged to goodwill related to associated companies in 2021. Undiscounted Undiscounted value DKK’000 Book value value Book value Falling due for payment within one year 7,120 7,337 222 0 7,234 7,379 222 0 5,888 6,068 6,253 222 6,045 6,166 6,289 222 14. Inventories Falling due for payment within one and two years DKK’000 2021 2020 Falling due for payment within two and three years Raw materials and consumables Products in progress 46,104 22,929 9,931 25,359 17,195 7,127 Falling due for payment within three and four years Finished products Falling due for payment within four and ﬁve years 0 0 0 0 0 0 0 0 Total write-down of inventories (1,200) 77,764 (1,425) 48,255 Falling due for payment later Total 14,679 14,836 18,432 18,723 Costs of goods sold recognized as an expense during the period are DKK 853.7 million (DKK 751.8 million) and write downs of inventory recognized as an income oﬀ-setting scrapped inventory during the period are DKK 0.2 million (income of DKK 1.3 million), due to reversal of previous years write-down. 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. Chairman and CEO’s report Financial Highlights Our business Corporate Governance ESG Financial statements TCM Group Annual report 2021 59 Notes to the consolidated financial statements (continued) 16. Prepaid expenses and accrued income 18. Value adjustments of currency hedges DKK’000 2021 2020 Value adjustment of cash flow Value adjustment Total of cash flow Total 2020 Other prepaid expenses 3,235 438 DKK’000 hedges 2021 2021 hedges 2020 Total 3,235 438 Opening balance (614) (614) 0 0 As of 1 January 2020, contract work in progress amounted to DKK 1.0 million and prepayments from customers amounted to DKK 4.6 million and was related to activities sold in the beginning of 2021. Value adjustments of currency hedges before tax 750 750 (787) (787) Tax on value adjustments of currency hedges (165) (165) 173 173 17. Share capital Closing balance (29) (29) (614) (614) No. of No. of registered shares Hedging reserve shares outstanding Nominal value 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. 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 As of 1 January 2020 10,000,000 10,000,000 1,000,000 As of 31 December 2020 10,000,000 10,000,000 1,000,000 Share capital amounted to nominal DKK 1,000,000. 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 price No. of shares Nominel value % of shares As of 1 January 2021 0 832,227 832,227 0 0 0 8.3 8.3 Purchase of treasury shares As of 31 December 2021 83,223 135,976 83,223 135,976 As of 1 January 2020 0 0 0 0 As of 31 December 2020 0 0 0 0 Chairman and CEO’s report Financial Highlights Our business Corporate Governance ESG Financial statements TCM Group Annual report 2021 60 Notes to the consolidated financial statements (continued) 19. Earnings per share 21. Deferred tax Deferred tax Deferred tax Earnings per share before dilution Earnings per share before dilution are calculated by dividing proﬁt attributable to the shareholders by the weighted DKK’000 assets liabilities Net average number of outstanding ordinary shares during the period. Opening balance, 1 January 2021 Recognized in net proﬁt for the year Closing balance, 31 December 2021 0 53,220 472 53,220 472 0 DKK 2021 2020 0 53,692 53,692 Proﬁt attributable to shareholders (DKK'000) 110,709 9,584,933 11.55 102,243 10,000,000 10.22 Opening balance, 1 January 2020 Recognized in net proﬁt for the year Closing balance, 31 December 2020 0 0 0 53,516 (296) 53,516 (296) Weighted average number of outstanding ordinary shares before dilution Earnings per share before dilution (DKK) 53,220 53,220 The change in deferred tax liabilities for the period: 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. Refer to note 4. Deferred tax liabilities Temporary Temporary differences in intangible assets differences in tangible assets If all the performance targets set for the ﬁrst plan, PSU 2021 – 2023, are fully achieved, the aggregate allocated maximum number of share units and, accordingly, shares to be awarded based on this ﬁrst plan is 15,989 shares (gross earning). The expected vesting level of the maximum LTI amount for Executive Management for 2021 is estimated to be approximately corresponding to a granted value of 50%. DKK’000 Other Total As of 1 January 2021 39,336 55 13,544 771 340 -354 -14 53,220 472 Recognized in net proﬁt for the year As of 31 December 2021 DKK 2021 2020 39,391 14,315 53,692 Weighted average number of outstanding ordinary shares Employee share option scheme 9,584,933 7,995 10,000,000 0 As of 1 January 2020 40,999 (1,663) 39,336 12,932 612 (415) 755 53,516 (296) Recognized in net proﬁt for the year As of 31 December 2020 Weighted average number of outstanding ordinary shares after dilution Earnings per share after dilution 9,592,928 11.54 10,000,000 10.22 13,544 340 53,220 Corporation tax-rate in Denmark for the year is 22.0%. There are no loss carryforwards. 20. Dividend The Board of Directors recommends to the Annual General Meeting to distribute an ordinary dividend of DKK 6 per share. Excluding treasury shares this corresponds to DKK 54 million. Furthermore, to provide a mandate to the Board of Directors with the option to distribute an extraordinary divi- dend during 2022 in the range DKK 25-75 million. Chairman and CEO’s report Financial Highlights Our business Corporate Governance ESG Financial statements TCM Group Annual report 2021 61 Notes to the consolidated financial statements (continued) 22. Bank loans and mortgage loans 23. Financial assets and liabilities (continued) DKK’000 2021 2020 2020 Derivative Hedging Financial assets Financial liabilities Maturity structure Within 1 year instruments measured at fair value measured at amortized cost measured at amortized cost Total carrying amount 2,805 11,049 16,776 30,630 12,738 20,587 19,759 53,085 DKK’000 Between 1 and 5 years Longer than 5 years Total Other long-term receivables Trade receivable 0 695 24,395 0 695 24,395 0 0 0 0 0 0 Refer to note 2 for additional information regarding bank loans and mortgage loans. During 2021, an extraordinary repay- ment has been made on bank loans of DKK 10.0 million (DKK 86.0 million). Cash and cash equivalents Total 125,855 150,946 125,855 150,946 23. Financial assets and liabilities Long-term interest-bearing liabilities Current interest-bearing liabilities Accounts payable 0 0 0 0 0 0 0 0 64,397 23,623 125,368 24,187 64,397 23,623 125,368 24,187 2021 Derivative Hedging instruments measured at fair value Financial assets measured at amortized cost Financial liabilities measured at amortized cost 0 Total carrying amount Long-term other liabilities Short-term current other liabilities Total 0 DKK’000 787 787 54,455 292,030 55,242 292,817 Other long-term receivables Trade receivable 0 965 28,235 11,884 41,084 0 965 28,235 11,884 41,084 0 0 0 0 0 0 Cash and cash equivalents Total 24. Acquisition of operations (business combinations) Acquisition 45% af Celebert ApS Long-term interest-bearing liabilities Current interest-bearing liabilities Accounts payable 0 0 0 0 0 0 0 0 43,014 174,727 158,924 1,132 43,014 174,727 158,924 1,132 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 activi- ties of Celebert and has initially acquired a 45% stake in Celebert. 0 Long-term other liabilities Short-term current other liabilities Total 0 Cost related to the transaction amounted to DKK 4.0 million and are presented under non-recurring items. 37 37 52,187 52,224 430,021 429,984 Chairman and CEO’s report Financial Highlights Our business Corporate Governance ESG Financial statements TCM Group Annual report 2021 62 Notes to the consolidated financial statements (continued) 25. Changes in liabilities attributable to the financing activities (continued) 24. Acquisition of operations (business combinations) (continued) In 2021, the total amount of cash ﬂows related to lease liabilities was DKK 8.5 million, of which the interest pay- DKK’000 2021 ments related to the recognized lease liabilities were DKK 0.2 million and repayments DKK 4.2 million. Assets held for sale Purchase price 29,000 32,178 61,178 Mortgage loans Bank lease DKK’000 loans Cash pool liabilities Total Merged activities Opening balance, 1 January 2020 Non-cash change 36,237 0 116,406 0 0 0 40,899 4,916 193,542 4,916 Equity value of acquired net assets – 45% Goodwill before elimination (15,528) 45,650 (14,292) 31,358 New lease liabilities Elimination of internal proﬁt Goodwill after elimination Subleases settled directly from the franchisee 0 0 0 0 735 735 0 0 0 (5,711) 0 (5,711) 735 Amortization of borrowing costs Goodwill is attributable to future expected growth potential and expected synergies with the merger of our e-com- (795) (60) merce activities in kitchn.dk with Celebert ApS. Financing cash ﬂows Repayment of loans (2,794) (97,500) 0 (5,168) (105,462) 25. Changes in liabilities attributable to the financing activities (2,794) (97,500) 0 (5,168) (105,462) Mortgage loans Bank lease Closing balance, 31 December 2020 33,443 19,641 0 34,936 88,020 DKK’000 loans Cash pool liabilities Total Opening balance, 1 January 2021 Non-cash change 33,443 19,641 0 34,936 88,020 26. Pledged assets, contingent liabilities and commitments New lease liabilities 0 0 0 0 0 0 3,184 (411) 3,184 (411) New lease liabilities The Group has, in respect of the it’s commitment to Nykredit, issued a pledge ban on the Group’ assets. 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. Subleases settled directly from the franchisee 0 9 9 0 359 359 0 0 0 (7,061) 0 (7,061) 368 For collateral for debt to mortgage lender, DKK 30.6 million (DKK 33.4 million), pledges have been given in land and buildings with a carrying amount as of 31 December 2021 amounting to DKK 86.3 million (DKK 74.2 million). Amortization of borrowing costs (4,288) (3,920) Guarantees related to AB92 - provisions of work and supplies within building and engineering – amount to a total of DKK 1.9 million (DKK 3.4 million). Financing cash ﬂows Repayment of loans Changes in cash pool (2,823) 0 (20,000) 0 0 160,701 160,701 (4,237) 0 (27,060) 160,701 133,641 Other bank guarantees amount in total to DKK 0.3 million (DKK 0.3 million). (2,823) (20,000) (4,237) Closing balance, 31 December 2021 30,630 0 160,701 26,411 217,741 Chairman and CEO’s report Financial Highlights Our business Corporate Governance ESG Financial statements TCM Group Annual report 2021 63 Notes to the consolidated financial statements (continued) 27. Assets and liabilities held for sale 29. Events after the balance sheet date Assets and liabilities held for sale consists in 2020 of assets and liabilities related to the Svane Køkkenet store in 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. Copenhagen, which has been sold with eﬀect from 5 January 2021. DKK’000 2021 2020 Assets held for sale Tangible ﬁxed assets Trade receivables 30. Companies in the TCM group 0 39 Business Share of equity 0 0 0 0 0 3,667 1,504 5,828 747 registration no Domicile Inventories Parant company Cash and cash equivalents Prepaid expenses and accrued income Total TCM Group A/S 37291269 Holstebro 11,785 Subsidiaries TMK A/S 75924712 31599555 Holstebro Aulum 100% 100% Liabilities held for sale Prepayments from customers Trade payables Nettoline A/S 0 0 0 0 4,890 1,147 Associated companies Other liabilities 3,001 9,038 Celebert ApS 27428959 Aalborg 45% Total With eﬀect from 5 January 2021, TMK A/S sold it’s subsidiary, Køkkenretail ApS. With eﬀect from 6 July 2021, Nettoline A/S bought 45% of Celebert ApS. 28. Related party transactions Apart from the above mentioned, shareholdings in subsidiaries and associated companies are unchanged compared to last year. Related parties with a controlling interest As at 31 December 2021, 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. There are no other transactions with related parties. Chairman and CEO’s report Financial Highlights Our business Corporate Governance ESG Financial statements TCM Group Annual report 2021 64 Definitions Key figures Ratios: Key ﬁgures and ﬁnancial ratios have been deﬁned and calculated as stated below: Ratio Calculation formula Gross margin Gross proﬁt * 100 Revenue Following key ﬁgures are not directly derived from the face of the income statement or balance sheet and as such are deﬁned as follows: EBITDA margin EBITA margin EBITDA * 100 Revenue Adjusted EBITDA: Operating proﬁt before non-recurring items (Adjusted EBIT) plus depreciation and amortization. EBITA * 100 Revenue Adjusted EBITA: Operating proﬁt before non-recurring items (Adjusted EBIT) plus amortization. Adjusted EBITA margin EBIT margin Adjusted EBITA * 100 Revenue Net interest-bearing debt: Net working capital: Current and non-current interest-bearing loans and borrowings less interest-bearing receivables and cash and cash equivalents. EBIT * 100 Revenue The sum of inventories, trade receivables, other receivables (excluding subleases) and prepayments less the sum of prepayments from costumers, trade payables and other liabilities. Solvency ratio Equity * 100 Balance sheet total Leverage ratio Net interest-bearing debt excluding tax liabilities 12 months adjusted EBITDA NWC ratio Net working capital (1) * 100 12 months revenue Capex ratio excl. acquisitions Capex ratio excluding acquisitions is calculated as investments in tangible assets (capex) divided with revenue. Capex is exclusive investments in connection with acquisitions. Cash conversion ratio Cash conversion ratio is calculated as adjusted EBITDA less the change in net working capital (1) and capex excluding acquisitions divided by adjusted EBITDA. The ratio is for the last twelve months. The deﬁnition and calculation formula for earnings per share before and after dilution can be found in note 19 in the consolidated ﬁnancial statements. (1) Net working capital is adjusted with assets and liabilities held for sale. Chairman and CEO’s report Financial Highlights Our business Corporate Governance ESG Financial statements TCM Group Annual report 2021 65 Financial statements of the parent company 66 66 67 68 68 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 2021 66 income statement and Statement of comprehensive income Balance sheet as of 31 December DKK’000 Note 2021 2020 DKK’000 Assets Note 2021 2020 Revenue 8,000 8,000 5,704 5,704 (14,041) (8,337) 0 Gross proﬁt Non-current assets Administrative expenses Operating loss before non-recurring items Non-recurring items Operating loss 2, 3 (12,051) (4,051) (79) Investments in subsidiaries Financial non-current assets Total non-current assets 6 496,756 496,756 496,756 496,756 496,756 496,756 (4,130) (8,337) Current assets Dividend from subsidiaries Financial income 150,000 422 100,000 165 Receivables from subsidiaries 24,832 0 5,350 78 4 4 Deferred tax assets Financial expenses Proﬁt before tax (2,126) 144,166 (2,662) 89,166 Tax receivables 6,395 2,273 33,500 5,050 291 Prepaid expenses and accrued income Total current assets 10,768 Tax for the year 5 1,231 2,384 Net proﬁt for the year 145,398 91,550 Cash and cash equivalents Total current assets Total assets 12 33,511 2,857 13,625 510,381 Other comprehensive income 530,267 Items that may be reclassiﬁed subsequently to proﬁt or loss Value adjustments of cash-ﬂow hedges before tax Tax on value adjustments of cash-ﬂow hedges Other comprehensive income for the year Total comprehensive income 0 0 0 0 0 0 145,398 91,550 Chairman and CEO’s report Financial Highlights Our business Corporate Governance ESG Financial statements TCM Group Annual report 2021 67 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 2021 2020 Opening balance 01.01.2021 1,000 0 353,427 130,000 484,427 Equity and liabilities Net proﬁt for the year 0 0 90,994 54,404 145,398 Share capital 1,000 (135,976) 444,421 54,404 1,000 0 Total comprehensive income for the year 0 0 0 90,994 54,404 (130,000) 0 145,398 (130,000) (135,976) 363,849 Treasury shares Dividend paid 0 0 0 Retained earnings Proposed dividend for the ﬁnancial year Total equity 353,427 130,000 484,427 Purchase of treasury shares Closing balance 31.12.2021 0 (135,976) 1,000 (135,976) 444,421 54,404 363,849 Opening balance 01.01.2020 Reversed proposed dividend Net proﬁt for the year 1,000 0 0 0 339,377 52,500 52,500 (52,500) 130,000 392,877 0 Bank loans 7 7 0 1,132 1,132 9,715 4,878 0 0 Other payables (38,450) 91,550 Total long-term liabilities 14,593 Total comprehensive income for the year 0 0 0 0 0 (38,450) 0 130,000 0 91,550 0 Current liabilities Bank loans Dividend paid* 160,701 2,235 9,925 267 Closing balance 31.12.2020 1,000 353,427 130,000 484,427 Trade payables * At the general meeting on 11 June 2020, it was concluded that no dividend were to be distributed regarding the ﬁnancial year 2019. Payables to subsidiaries Other payables 1,525 0 826 1,168 11,360 25,954 Total current liabilities Total liabilities 165,287 166,419 Total equity and liabilities 530,267 510,381 Chairman and CEO’s report Financial Highlights Our business Corporate Governance ESG Financial statements TCM Group Annual report 2021 68 Cash flow statement Notes to the parent financial statements 1. Significant accounting estimates and judgements DKK’000 NOTE 2021 2020 Determining the carrying amount of certain assets and liabilities requires an estimate of how future events will aﬀect the value of those assets and liabilities at the balance sheet date. Estimates that are signiﬁcant to the Parent’s ﬁnancial reporting are made, for instance, related to valuation of investments in sub- sidiaries, which constitute a major share of the Par- ent’s total assets. is not recoverable. Measuring subsidiaries requires signiﬁcant estimates to be made when making diﬀer- ent assumptions, including expected future cash ﬂows, discount rate and terminal value growth rates. The sensitivity to changes in the assumptions applied col- lectively and individually – may be signiﬁcant. Operating activities Operating loss (4,130) (25,874) 4,629 (8,337) (31,157) 33,543 Income tax paid Change in operating receivables Change in operating liabilities Cash ﬂow from operating activities (851) (5,732) (11,683) Particular estimation uncertainties and judgements made in respect of the Group is discussed in note 1 to the consolidated ﬁnancial statements. (26,226) Subsidiaries are tested for impairment if events or other circumstances indicate that the carrying amount Dividend received 150,000 100,000 Cash ﬂow from investing activities 150,000 100,000 Interest paid (1,344) 140,701 (1,763) (97,500) 0 Proceeds and repayment of loans Purchase of treasury shares Dividend paid 8 (135,976) (130,000) (126,619) 0 Cash ﬂow from ﬁnancing activities (99,263) Cash ﬂow for the year (2,845) (10,946) Cash at start of year Cash ﬂow for the year Cash at end of year 2,857 (2,845) 12 13,803 (10,946) 2,857 Chairman and CEO’s report Financial Highlights Our business Corporate Governance ESG Financial statements TCM Group Annual report 2021 69 Notes to the parent financial statements (continued) 2. STaff Costs 3. Audit fee In addition to statutory audit, Deloitte Statsautoriseret Revisionspartnerselskab, the auditors appointed at the DKK’000 2021 2020 Annual General Meeting, provides other assurance engagements and other services to the Group. Total costs for employee benefits Salaries and other remuneration Social security costs DKK’000 2021 2020 7,341 21 8,728 16 Specification by type of costs Statutory audit Pension costs – deﬁned contribution plans Total costs for employees 574 481 185 65 150 0 7,936 9,225 Other assurance engagements 250 150 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 Deloitte Statsautoriseret Revisionspartnerselskab to the Company amounted to DKK 65 thousand in 2021 and consisted of various services. In 2020, the fee for non-audit services delivered by Deloitte Statsautoriseret Revisionspartnerselskab to the Company amounted to DKK 0 thousand. Remuneration and other benefits BasE salary, Variable Directors remunera- Other benefits Pension costs Number of Total individuals 4. Financial income and expenses DKK’000 fees tion DKK’000 2021 2020 2021 Financial income Board of Directors Executive Management Total 2,188 4,567 6,755 0 377 377 10 0 2,198 5,929 8,127 5 Interest income from subsidiaries 422 165 602 383 2 Financial expenses 612 383 7 Interest expense on liabilities measured at amortized costs (2,125) (2,662) Total (1,704) (2,497) 2020 Board of Directors Executive Management Total 2,188 4,536 6,724 0 2,004 2,004 16 0 0 481 481 2,204 7,021 9,225 5 2 7 16 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 2021 70 Notes to the parent financial statements (continued) 5. Corporation tax 6. Investments in subsidiaries Other Total comprehen- sive income DKK’000 2021 2020 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 1,231 0 1,231 Carrying amount at end of year Total 1,231 0 1,231 Investments in subsidiaries comprise: TMK A/S, 100% Tax for the previous year can be speciﬁed as follows: Current tax 2,384 0 2,384 Total 2,384 0 2,384 Refer to note 30 of the consolidated ﬁnancial statements for a list of all companies in the TCM Group. Reconciliation of the eﬀective tax rate for the year can be speciﬁed as follows: The carrying amount of the Parent's investments in subsidiaries is tested for impairment if an indication of impairment exists. There has not been identiﬁed any indication of impairment. DKK’000 % 2021 % 2020 7. Bank loans Tax rate 22.0 (22.9) 0.0 31,717 (33,000) 52 22.0 (22.0) 0.0 19,616 (22,000) 1 Non-taxable income Non-deductible expenses Eﬀective tax rate for the year DKK’000 2021 2020 (0.9) (1,231) 0.0 (2,383) Maturity structure Within 1 year 0 9,925 9,715 0 Between 1 and 5 years Longer than 5 years Total 0 0 0 19,640 Chairman and CEO’s report Financial Highlights Our business Corporate Governance ESG Financial statements TCM Group Annual report 2021 71 Notes to the parent financial statements (continued) 8. Changes in liabilities attributable to the financing activities 9. Guarantees, contingent liabilities and collateral 11. Events after the balance sheet date DKK’000 Bank loans Cash pool Total The Company has, in respect of the Group’s commit- ment to Nykredit, issued a pledge ban on all assets. The Company is jointly and severally liable with group companies, but all debt in the Group’s commitment to Nykredit is recognized in the company. 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 the annual report. Opening balance, 1 January 2021 Non-cash change 19,641 0 19,641 Amortization of borrowing costs 359 0 359 359 0 359 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 compa- nies, 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. 12. Accounting policies Financing cash ﬂows Repayment of loans Changes in cash pool These parent ﬁnancial statements are prepared under the historical cost convention and presented in accordance with International Financial Reporting Standards as adopted by the EU and additional requirements of the Danish Financial Statements Act. (20,000) 0 0 160,701 160,701 (20,000) 160,701 140,701 (20,000) Closing balance, 31 December 2021 0 160,701 160,701 Accounting policies are unchanged compared to last year. 10. Related parties Opening balance, 1 January 2020 Non-cash change 116,406 0 116,406 Description of accounting policies applied Compared with the accounting policies described for the consolidated ﬁnancial statements (see note 1 to the consolidated ﬁnancial statements), the accounting policies applied by the Parent are diﬀerent in the following: For speciﬁcation of related parties refer to note 28 and 30 of the consolidated ﬁnancial statements. Amortization of borrowing costs 735 0 735 735 0 735 Referring to note 4 of the consolidated ﬁnancial state- ments: Remuneration to Executive Management and Board of Directors. Financing cash ﬂows Repayment of loans (97,500) 0 (97,500) Dividend income (97,500) 0 (97,500) Management fee from subsidiaries in the ﬁnancial year amounts to DKK 8.0 million (DKK 5.7 million). Distribution of proﬁts accumulated by subsidiaries is taken to income in the Parent’s income statement in the ﬁnancial year in which the dividend is declared. If an amount is distributed exceeding the subsidiary's comprehensive income for the year, then an impair- ment test is performed. Closing balance, 31 December 2020 19,641 0 19,641 Intergroup transactions are carried out on arm’s length principles. Aside from this, no transactions with the Executive Management or major shareholders or other related parties have been made during the year. Chairman and CEO’s report Financial Highlights Our business Corporate Governance ESG Financial statements TCM Group Annual report 2021 72 Notes to the parent financial statements (continued) 12. Accounting policies (continued) Investments in subsidiaries Capital management Investments in subsidiaries are measured at cost in the parent ﬁnancial statements. If an indication of impairment exists, then an impairment test is per- formed as described in the accounting policies for the consolidated ﬁnancial statements. If the carrying amount exceeds the recoverable amount, investments are written down to such lower amount. The bank loans contains covenants. There has been no breach of any covenant during the year. The interest rate on the bank loan is variable. The Group targets a leverage ratio of max 2.25 x EBITDA. However, if acquisition opportunities arise, the Company may deviate from this policy. The lever- age ratio as of 31 December 2021 is 1.33. Interest-rate risk It is group policy to fully or partially hedge interest rate risks on loans when it is assessed that the debt is material. The group manages interest rate risk by maintaining an appropriate mix between ﬁxed and ﬂoating rate borrowings, and by use of interest rate swap contracts. The Board of Directors has adopted a dividend policy with a target payout ratio of 40-60 percent of consoli- dated net proﬁt for the year. The Board of Directors recommends to the Annual General Meeting to distrib- ute an ordinary dividend of DKK 6 per share. Exclud- ing treasury shares this corresponds to DKK 54 mil- lion. Furthermore, to provide a mandate to the Board of Directors with the option to distribute an extraordi- nary dividend during 2022 in the range DKK 25-75 million. If distribution is made from reserves other than accu- mulated proﬁts of subsidiaries, such distribution will reduce the cost of the investments if the distribution is in the nature of a repayment of the Parent's investment. 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 2021 of DKK 1.6 million (DKK 0.2 million). 13. Financial risks Liquidity risks Translation exposure 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 51 million (DKK 139 million and DKK 75 million in unutilised overdraft facilities) as of 31 December 2021. The Company does not have any subsidiaries in foreign countries, why there is no translation exposure. 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 2021. No adjustments have been made for instalments, raising of loans, etc. during the course of the year. Credit risk The Company does not have any external activities. No material credit risk have been identiﬁed. Financial exposure The Group has signes a new ﬁnance agreement with Nykredit Bank comprising a committed facility of DKK 200 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. Bank loans in Nordea with a nominal amount of DKK 20 million as of 31 December 2020 was repaid in 2021. The computed expected ﬂuctuations are based on the current market situation and expectations for the market developments in the interest rate level. Chairman and CEO’s report Financial Highlights Our business Corporate Governance ESG Financial statements TCM Group Annual report 2021 73 Statement by Management on the annual report Independent auditor's report The Board of Directors and the Executive Management have today considered and approved the annual report for the period 1 January 2021 – 31 December 2021. The consolidated ﬁnancial statements and the parent 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 consolidated financial statements and the parent financial statements Opinion Accountants’ International Code of Ethics for Profes- sional Accountants (IESBA Code) and the additional ethical requirements applicable in Denmark, and we have fulﬁlled our other ethical responsibilities in accordance with these requirements and the IESBA Code. We believe that the audit evidence we have obtained is suﬃcient and appropriate to provide a basis for our opinion. We have audited the consolidated ﬁnancial statements and the parent ﬁnancial statements of TCM Group A/S for the ﬁnancial year 01.01.2021 - 31.12.2021, which comprise the income statement, statement of compre- hensive income, balance sheet, statement of changes in equity, cash ﬂow statement and notes, including a summary of signiﬁcant accounting policies, for the Group as well as for the Parent. The consolidated ﬁnancial statements and the parent ﬁnancial state- ments are prepared in accordance with International Financial Reporting Standards as adopted by the EU and additional requirements of the Danish Financial Statements Act. In our opinion, the consolidated ﬁnancial statements and the parent ﬁnancial statements give a true and fair view of the Group’s and the Parent’s ﬁnancial position at 31 December 2021 as well as of the results of their operations and the consolidated cash ﬂows for the period 1 January 2021 – 31 December 2021. In our opinion, the management commentary contains a fair review of the development of the Group’s and the Parent’s business and ﬁnancial matters, the results for the period and of the Parent’s ﬁnancial position and the ﬁnancial position as a whole of the entities included in the consolidated ﬁnancial statements, together with a description of the principal risks and uncertainties that the Group and the Parent face. To the best of our knowledge and belief, we have not provided any prohibited non-audit services as referred to in Article 5(1) of Regulation (EU) No 537/2014. Holstebro, 24 February 2022 TCM Group A/S was listed on Nasdaq OMX Copenha- gen upon completion of the initial public oﬀering on 24 November 2017 from which date TCM Group A/S became a Public Interest Entity. We have been reap- pointed by decision of the Annual General Meeting for a total continuous engagement period of ﬁve years up to and including the ﬁnancial year 2021. Executive Management In our opinion, the consolidated ﬁnancial statements and the parent ﬁnancial statements give a true and fair view of the Group’s and the Parent’s ﬁnancial position at 31.12.2021, and of the results of their oper- ations and cash ﬂows for the ﬁnancial year 01.01.2021 - 31.12.2021 in accordance with International Financial Reporting Standards as adopted by the EU and addi- tional requirements of the Danish Financial State- ments Act. Torben Paulin Mogens Elbrønd Pedersen Chief Executive Oﬃcer Chief Financial Oﬃcer Key audit matters Key audit matters are those matters that, in our pro- fessional judgement, were of most signiﬁcance in our audit of the consolidated ﬁnancial statements and the parent ﬁnancial statements for the ﬁnancial year 01.01.2021 - 31.12.2021. Board of Directors Our opinion is consistent with our audit book com- ments issued to the Audit Committee and the Board of Directors. Sanna Mari Suvanto-Harsaae Anders Tormod Skole-Sørensen Statement on the management commentary Management is responsible for the management commentary. Chairman Deputy Chairman Basis for opinion We conducted our audit in accordance with Interna- tional Standards on Auditing (ISAs) and the additional requirements applicable in Denmark. Our responsibili- ties under those standards and requirements are fur- ther described in the “Auditor’s responsibilities for the audit of the consolidated ﬁnancial statements and the parent ﬁnancial statements” section of this auditor’s report. We are independent of the Group in accordance with the International Ethics Standards Board for Our opinion on the consolidated ﬁnancial statements and the parent ﬁnancial statements does not cover the management commentary, and we do not express any form of assurance conclusion thereon. Carsten Bjerg Søren Mygind Eskildsen Danny Feltmann Espersen In connection with our audit of the consolidated ﬁnancial statements and the parent ﬁnancial state- ments, our responsibility is to read the management Chairman and CEO’s report Financial Highlights Our business Corporate Governance ESG Financial statements TCM Group Annual report 2021 74 Independent auditor’s report (continued) 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 con- trol that we identify during our audit. commentary and, in doing so, consider whether the management commentary is materially inconsistent with the consolidated ﬁnancial statements and the parent ﬁnancial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. cease operations, or has no realistic alternative but to • Obtain an understanding of internal control rele- vant to the audit in order to design audit proce- dures 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’s internal control. do so. Auditor’s responsibilities for the audit of the consolidated financial statements and the parent financial statements Our objectives are to obtain reasonable assurance about whether the consolidated ﬁnancial statements and the parent 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. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit con- ducted 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 consoli- dated ﬁnancial statements and these parent ﬁnancial statements. • • 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 in preparing the consolidated ﬁnancial statements and the parent ﬁnancial statements, and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast signiﬁcant doubt on the Group’s and the Parent’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 consolidated ﬁnancial statements and the parent 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 and the Entity to cease to continue as a going concern. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to commu- nicate with them all relationships and other matters that may reasonably be thought to bear on our inde- pendence, and, where applicable, safeguards put in place and measures taken to eliminate threats. Moreover, it is our responsibility to consider whether the management commentary provides the information required under the Danish Financial Statements Act. Based on the work we have performed, we conclude that the management commentary is in accordance with the consolidated ﬁnancial statements and the parent ﬁnancial statements and has been prepared in accordance with the requirements of the Danish Finan- cial Statements Act. We did not identify any material misstatement of the management commentary. From the matters communicated with those charged with governance, we determine those matters that were of most signiﬁcance in the audit of the consoli- dated ﬁnancial statements and the parent 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 or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest beneﬁts of such communication. Management’s responsibilities for the consolidated financial statements and the parent financial statements Management is responsible for the preparation of con- solidated ﬁnancial statements and parent ﬁnancial statements that give a true and fair view in accordance with International Financial Reporting Standards as adopted by the EU and additional requirements of the Danish Financial Statements Act, and for such internal control as Management determines is necessary to ena- ble the preparation of consolidated ﬁnancial statements and parent ﬁnancial statements that are free from material misstatement, whether due to fraud or error. As part of an audit conducted in accordance with ISAs and the additional requirements applicable in Den- mark, we exercise professional judgement and main- tain professional scepticism throughout the audit. We also: • • Evaluate the overall presentation, structure and content of the consolidated ﬁnancial statements and the parent ﬁnancial statements, including the dis- closures in the notes, and whether the consolidated ﬁnancial statements and the parent ﬁnancial state- ments 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 activities within the Group to express an opinion on the consolidated ﬁnancial state- ments. We are responsible for the direction, super- vision and performance of the group audit. We remain solely responsible for our audit opinion. Report on compliance with the ESEF Regulation As part of our audit of the consolidated ﬁnancial statements and the parent ﬁnancial statements of TCM Group A/S we performed procedures to express an opinion on whether the annual report for the ﬁnancial year 01.01.2021- 31.12.2021, with the ﬁle name TCM- Group-2021-12-31-en.zip, is prepared, in all material respects, in compliance with the Commission Dele- gated 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. • Identify and assess the risks of material misstate- ment of the consolidated ﬁnancial statements and the parent ﬁnancial statements, whether due to fraud or error, design and perform audit proce- dures responsive to those risks, and obtain audit evidence that is suﬃcient and appropriate to pro- vide a basis for our opinion. The risk of not detect- ing 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. In preparing the consolidated ﬁnancial statements and the parent ﬁnancial statements, Management is responsible for assessing the Group’s and the Parent’s ability to continue as a going concern, for disclosing, as applicable, matters related to going concern, and for using the going concern basis of accounting in preparing the consolidated ﬁnancial statements and the parent ﬁnancial statements unless Management either intends to liquidate the Group or the Entity or to Chairman and CEO’s report Financial Highlights Our business Corporate Governance ESG Financial statements TCM Group Annual report 2021 75 Independent auditor’s report (continued) Management is responsible for preparing an annual report that complies with the ESEF Regulation. This responsibility includes: • • 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; • The preparing of the annual report in XHTML format; • • Evaluating the completeness of the iXBRL tagging of the consolidated ﬁnancial statements; Evaluating the appropriateness of the company’s use of iXBRL elements selected from the ESEF tax- onomy and the creation of extension elements where no suitable element in the ESEF taxonomy has been identiﬁed; • The selection and application of appropriate iXBRL tags, including extensions to the ESEF taxonomy and the anchoring thereof to elements in the tax- onomy, for ﬁnancial information required to be tagged using judgement where necessary; Ensuring consistency between iXBRL tagged data and the consolidated ﬁnancial statements pre- sented in human readable format; and For such internal control as Management deter- mines necessary to enable the preparation of an annual report that is compliant with the ESEF Regulation. • • • • Evaluating the use of anchoring of extension ele- ments to elements in the ESEF taxonomy; and Reconciling the iXBRL tagged data with the audited consolidated ﬁnancial statements. In our opinion, the annual report of TCM Group A/S for the ﬁnancial year 01.01.2021 - 31.12.2021, with the ﬁle name TCM-Group-2021-12-31-en.zip, is prepared, in all material respects, in compliance 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 audi- tor’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: Aarhus, 24 February 2022 Deloitte Statsautoriseret Revisionspartnerselskab Business Registration No 33 96 35 56 Henrik Vedel Chris Middelhede State-Authorised Public Accountant Identiﬁcation No (MNE) mne45823 State-Authorised Public Accountant Identiﬁcation No (MNE) mne10052

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