TCM Group A/S

Skautrupvej 16
7500 Holstebro
37291269
529900P5DOKT3XLWL480

2021-01-01 – 2021-12-31
2020-01-01 – 2020-12-31

Corporate Governance | TCM Group A/S

Regnskabsklasse D
Årsrapport
37291269
TCM Group A/S
Skautrupvej 16
7500 Holstebro

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529900P5DOKT3XLWL480	2021-01-01 – 2021-12-31
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529900P5DOKT3XLWL480	2020-01-01 – 2020-12-31
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	2021-01-01 – 2021-12-31	2020-01-01 – 2020-12-31
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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 Køkkenet 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 CEO’s report	13 Our business
06 Letter to our shareholders	15 Strategy and financial targets
07 Financial Highlights	16 Danish design and Danish production
08 Financial Highlights	17 Risk management
09 Business review	19 Corporate governance
10 Key figures and ratios	20 Corporate governance
11 Financial review	22 Board of Directors and Executive Management
	23 Financial statements
26 ESG	27 Our value chain impact
28 A sustainable worklife	29 We take responsibility
31 Reporting according to EU-taxonomy	33 New ways ahead
35 Together we improve	36 Financial statements
38 Financial statements	39 Financial statements
40 Consolidated financial statements	65 Financial statements of the Parent company
41 Income statement	66 Income statement
41 Statement of comprehensive income	66 Statement of comprehensive income
42 Balance sheet as of 31 December	66 Balance sheet as of 31 December
43 Statement of changes in equity	73 Independent auditor’s report
43 Cash flow statement	67 Changes in shareholders´s equity
44 Notes to statement of cash flows	68 Cash flow statement
64 Definitions	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.

Letter to our Shareholders

2021 was in many ways an exceptional year. The shutdown following the pandemic a.o. led to a booming housing market and a home 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.# Chairman and CEO’s report

Financial Highlights

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 stores in Norway primarily within Svane Køkkenet. The number of branded stores 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. 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.

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.

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 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. 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.

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.

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 corresponds to DKK 54 million. Furthermore, we will propose to the Annual General Meeting, that

Sanna Mari
Paulin Suvanto-Harsaae
Chairman

Torben
Suvanto-Harsaae
CEO

TCM Group has been a member of the United National Global Compact since 2011 and commits to the 10 UNGC principles.

Financial Highlights

Our business

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	AVERAGE EMPLOYEES
1,108 mio.	11%
		93
Other countries		91%
93 branded stores
across Scandinavia
504
Denmark
91%
Mi0.
39

Adjusted EBIT, DKK	Adjusted EBIT Margin	NWC ratio	LEVERAGE RATIO
138 Mio.	12.4 %	-7.4 %	1.33

Svane Køkkenet	Tvis Køkkener	Nettoline
31 %	23 %	13 %

Chairman and CEO’s report
Financial Highlights
Our business
Corporate governance
ESG
Financial statements

TCM Group Annual report 2021
9

Our business

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.

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.

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.

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.

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.

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.

The strategic focus on innovation and product development will continue in 2022, where we will launch new exciting designs in 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.

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 July TCM Group 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
Income statement
Revenue	1,108,274	1,024,588	1,006,942	899,911	817,330
Gross proﬁt	254,601	272,819	279,622	167,387	174,399
EBITDA	155,365	154,674	139,707	156,058	161,058
Adjusted EBITDA	161,058	155,590	145,672	131,367	154,118
Growth ratios
Revenue growth, %	8.2%	-6.7%	-1.4%	11.9%	10.1%
Gross proﬁt growth, %	-6.1%	-2.4%	67.0%	-3.8%	34.9%
Adjusted EBIT growth, %	3.5%	6.8%	11.1%	-13.5%	-8.1%
EBIT growth, %	0.4%	10.1%	-10.7%	-3.4%	-9.0%
Net proﬁt growth, %	8.3%

DKK’000	2021	2020	2019*	2018	2017
Earnings before interest. tax. depreciation and amortisation (EBITDA)	155,365	154,674	139,707	156,058	161,058
Adjusted EBITDA	161,058	155,590	145,672	131,367	154,118
Earnings before interest.

Financial Highlights

Revenue (DKKM)
1400
1200
1000
800
600
400
200
0
Adjusted Ebit (DKKM)
220
200
180
160
140
120
100
80
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20
0

Revenue – 8.2% organic growth

Revenue in 2021 grew by 8.2% to DKK 1,108.3 million (DKK 1,024.6 million). 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).

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.

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.

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).

EBIT

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 compared to 2020 off-set by a lower gross profit.

Net profit

Net profit for the financial year 2021 increased to 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.

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 government'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.

Net working capital (dkkm)

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%).
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.
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.

Equity - solvency ratio 46.3%

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. The solvency ratio was 46.3% at the end of 2021 (61.8%).

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).

Non-recurring items

The organic growth was driven 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:

Non-recurring items, DKK m	2021	2020
Costs related to Covid-19 and supply chain disruptions	14.0	1.3
Restructuring	5.0	0.0
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
Total	-0.7	5.0

Financial Ratios

	2021	2020	2019	2018	2017
Gross margin, %	23.0%	26.6%	27.8%	29.2%	28.3%
Adjusted EBITDA margin, %	14.0%	15.7%	17.3%	17.3%	16.1%
Adjusted EBIT margin, %	12.4%	13.6%	15.3%	15.6%	14.1%
EBIT margin, %	12.5%	13.1%	14.6%	15.3%	-
Solvency ratio, %	46.3%	61.8%	51.9%	48.4%	37.8%
Leverage ratio	1.33	-0.23	0.31	0.58	1.72
Net working capital	-81,649	-116,978	-42,873	51,702	-80,821
Net working capital, %	-7.4%	-11.4%	-10.8%	-10.5%	-9.9%
Net interest-bearing debt (NIBD)	199,461	-42,873	574,373	844,044	225,818
Equity	419,691	574,373	844,044	805,541	304,777
Capex ratio excl. acquisitions, %
Cash Flow
Free cash flow excl. acquisitions of operations	44,462	101,048	132,326	141,409	9,192
Capex excl. acquisitions	29,168	30,993	14,996	8,418
Cash conversion, %	58.3%	85.8%	99.9%	99.7%
Number of outstanding shares	9,174,073	9,584,933	10,000,000	10,000,000	10,000,000
Weighted average number of outstanding shares	9,174,073	9,584,933	10,000,000	10,000,000	10,000,000
Number of treasury shares	0	0	0	0	0
Earnings per share before dilution, DKK	11.55	10.22	11.13	10.37	4.80
Earnings per share after dilution, DKK	11.54	10.22	11.13	10.37	4.51

As of 1 January 2019 IFRS 16 Leases is implemented without restating comparative figures, why 2019 is not directly comparable to previous periods. Reference is made to description in note 1 Accounting policies.

Operating expenses - cost ratio

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 Celebert. Operating expenses amounted to 10.5% of revenue in 2021 against 13.0% in 2020.

Development in activities and finances*

	2021	2020
Reported revenue growth	8.2%
Adjusted EBIT margin	12.4%
*Figures in brackets refer to the corresponding period in 2020.

EBIT

	2021	2020	2019	2018	2017
Financial items	137,756	138,447	134,717	130,720	102,243
Adjusted operating profit (EBIT)	135,738	139,717	134,717	130,720	102,243
Operating profit (EBIT)	110,709	134,717	134,717	130,720	102,243
Profit before tax	142,357	111,322	132,300	103,710	66,741
Net profit for the year	137,756	138,447	134,717	130,720	102,243
Tax and amortisation (EBITA)
Margins
Adjusted EBITDA margin, %	14.0%	15.7%	17.3%	17.3%	16.1%
Adjusted EBIT margin, %	12.4%	13.6%	15.3%	15.6%	14.1%
EBIT margin, %	12.5%	13.1%	14.6%	15.3%
	2021	2020	2019	2018	2017
Balance sheet
Total assets	907,321	929,451	911,096	844,044	805,541
Solvency ratio, %	46.3%	61.8%	51.9%	48.4%	37.8%
Leverage ratio	1.33	-0.23	0.31	0.58	1.72
Net working capital	-81,649	-116,978	-42,873	51,702	-80,821
Net working capital, %	-7.4%	-11.4%	-10.8%	-10.5%	-9.9%
Net interest-bearing debt (NIBD)	199,461	-42,873	51,702	90,718	225,818
Equity	419,691	574,373	844,044	805,541	304,777
	2021	2020	2019	2018	2017
Capex ratio excl. acquisitions, %
Cash Flow
Free cash flow excl. acquisitions of operations	44,462	101,048	132,326	141,409	9,192
Capex excl. acquisitions	29,168	30,993	14,996	8,418
Cash conversion, %	58.3%	85.8%	99.9%	99.7%
Number of outstanding shares	9,174,073	9,584,933	10,000,000	10,000,000	10,000,000
Weighted average number of outstanding shares	9,174,073	9,584,933	10,000,000	10,000,000	10,000,000
Number of treasury shares	0	0	0	0	0
Earnings per share before dilution, DKK	11.55	10.22	11.13	10.37	4.80
Earnings per share after dilution, DKK	11.54	10.22	11.13	10.37	4.51

Cash conversion in 2021 was 58.3% (85.8%).

Net working capital - NWC ratio -7.4%

Net interest-bearing debt – leverage ratio 1.33

The Board of Directors recommends to distribute an ordinary dividend of DKK 6 per share

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.

Our Business

Nettoline

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

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

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 and financial targets

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%.

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 non-recurring items

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.

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.

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.

In addition to organic growth, the Group is monitoring the market for attractive acquisition opportunities primarily in Scandinavia and secondary in continental Europe.

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.

4-11% Estimated organic growth for the financial year 2022

Chairman and CEO’s report

Financial Highlights

Our business

TCM Group’s production sites are located in Tvis and Aulum, with two factories in Tvis and one factory in Aulum.

	Production sites
	2021
Tvis	2
Aulum	1

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

Store openings

	Total store openings	Total planned store openings
	2021	2022
Svane Køkkenet	5	4
Tvis Køkkener	1	1
Nettoline	3	3

31 december 2021

93 branded stores

ESG

Financial statements

TCM Group Annual report 2021 16

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 further debts or raise further equity capital to fund its acquisitions.

Production risks

Market risks

The Group is exposed to risks of not being able to fulfill customer orders e.g., due to fire, machine failure or lack of personnel. Fire prevention is a management priority and is carried out in

The Group is exposed to a decline in new housing construction and home sales as well as developments in the overall economy. The Group is order producing with a high degree of flexibility in the workforce, which means that the Group can respond quickly to market demand changes.

Customer risks

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:

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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 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.

The Group is insured against significant damage to property, plant and equipment and is in close dialogue with authorities and insurance companies with a view to further improving the mitigation of risks related to, inter alia, fire and pollution. 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. The Group’s financial risks are managed centrally as well as the Group’s liquidity management, including cash requirement and placement of excess liquidity.

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.

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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.

TCM Group Annual report 2021
20

Corporate governance

Future

Governance

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DATA PROTECTION POLICY

In connection with TCM Group’s delivery of products and services within kitchen, bathroom and storage, TCM Group collects relevant data. Our policy regarding data protection and confidentiality is accessible on our website at investor-en.tcmgroup.dk/CorporateGovernance

TCM Group is committed to exercising good corporate governance, and the Board of Directors therefore evaluates 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

Nasdaq Copenhagen has incorporated the recommendations of the Danish Committee on Corporate Governance in its Rules for Issuers of Shares. These 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 investor-en.tcmgroup.dk/CorporateGovernance

Duties and responsibilities of the Board of Directors

At TCM Group, management duties and responsibilities are divided between the company’s Board of Directors and Executive Management. No one person is a member of both these bodies, and no member of the Board of Directors has previously been a member of the Executive Management. TCM Group has laid down rules of procedure for the Board of Directors, which are reviewed annually. The Board of Directors holds 6 ordinary meetings each year and will further convene as needed. In the financial year 2021, 11 board meetings were held. 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 considers the group’s overall strategy in order to ensure continuous value creation.

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.

Nomination Committee

The Board of Directors has set up a Nomination Committee comprising at least two members of the Board of Directors, where at least one is also member of the Remuneration Committee. The Chairman of the Board of Directors is also the Chairman 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.

Remuneration Committee

The Board of Directors has set up a Remuneration Committee comprising at least two members of the Board of Directors. The purpose of the Remuneration Committee is to ensure that the Group maintains a remuneration policy for the members of the Board of Directors and the Executive Management as well as general guidelines for incentive pay to the Executive Management. The Remuneration Committee consists currently of 3 members, Sanna Suvanto- Harsaae, Anders Skole-Sørensen and Carsten Bjerg, and is led by Sanna Suvanto-Harsaae. The Remuneration Committee held 3 meetings in the financial year 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 remuneration is designed to align the interests of the Board of Directors, the Executive 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.

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.

In addition to the above, the Group has developed internal control and procedures in relation to the financial reporting process with the aim to enable the Group to monitor the Group’s performance, operations, funding, risk and internal control. The 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.

TCM Group Annual report 2021
21## Chairman and CEO’s report

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;
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 department 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 authorisation 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

Financial Highlights

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Corporate governance

ESG

Financial statements

TCM Group Annual report 2021

Board of Directors and Executive Management

| | # TCM Group Annual Report 2021

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
Sector: Kitchens, bathrooms and storage
Segment: MID CAP

S19 Light Grey

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ESG

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TCM Group Annual report 2021

UN Sustainable development goals (SDG)

SGD, 5 Gender equality (target 5.5), 8. Decent work and economic growth (target 8.5 and 8.8), 12. Responsible consumption and production, 13. Climate action, 15. Life on Land.

Highlights 2021

	2021	2020
Co2 emission reduction 2021	34
Accidents 2021	25%
Sickdays caused by work accidents		0.06‰
Waste recycle 2021	99.5%

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.

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.

Board of directors: 80% / 20%
Management: 79% / 21%
Employee: 68% / 32%

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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 development: Sustainability is an integrated part of our design process. We develop high quality products with long durability. RE:DUCE-RE:USE -RE:THINK is the foundation for our work with materials and processes.
Production of raw materials: Majority of our suppliers are placed locally. We audit the work of our suppliers on social, environmental and ethical issues.
Transport of raw materials: Together with our suppliers we work actively to secure the optimum transport form.
Manufacture: In manufacturing we work continuously with health and safety and with optimizing and minimizing the use of materials. We set high standards for our business partners and ourselves to improve in everything we do.
Sales: We inspire and challenge customers to the most sustainable solution for our customers.
Transport: 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 indoor environment.
Use: RE:DUCE-RE:USE -RE:THINK is the foundation for our work with materials and processes.
Waste and recycling: We audit the work of our suppliers on social, environmental and ethical issues.

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TCM Group Annual report 2021

ESG-Strategy

Our
1. Responsibility for people, planet and products
2. A sustainable work life
3. NEW WAYS AHEAD
4. Together we improve

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.

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TCM Group Annual report 2021

1. Responsibility for people, planet and products

All our products are designed and produced in Denmark. Production is based on proud traditions of high quality and good craftsmanship, combined with innovative production methods. 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.

3. NEW WAYS AHEAD

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.

2. A sustainable worklife

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:

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.

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.

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 1+2), reduce our production waste and increase the volume of waste that is recycled.

RE:USE RE:DUCE RE:THINK

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Labour and working conditions

UN Global Compact principle 1, 2, 3, 4, 5, 6, 10

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 normal 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. Flexibility is defined differently in different working 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.
Diversity and social commitment.

We work systematically with continuous reporting and follow-up on both actual work-related accidents 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 situations and circumstances possess a potential risk. This effort has resulted in a decrease of 89% in work-related accidents since 2018, showing a clear trend in the right direction. It is still our clear ambition to have zero work-related accidents in our organization.

Sickdays and absence

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.

TCM Group can firmly state that no products sold in 2021 were developed or produced using child labor.

Absence ratio related to work accidents in 2021
0.06‰

Absence ratio related to sickness in 2021
3.3%

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. The measures are e.g., full implementation of a whistle blower system and conducting arbitrary supplier audits. Both measures will be further outlined in sections “Whistle Blower System” and “Supplier Management”.

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31# Reported near miss Human rights

We conduct regular surveys of our workplace, by asking all employees to rate their working conditions and encourage them to give their recommendations and ideas on how we can improve our working environment, and we use this input actively to support a sustainable worklife.

# of reported near miss work accidents in TCM Group	2021	2020	2019
work accidents	896	1,159	1,139

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 incidents.

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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 the 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
Board of directors	1 of 5	1 of 5	1 of 5
	(20%)	(20%)	(20%)
Mgmt. (executive mgmt. and mgmt. group)	3 of 14	4 of 15	2 of 10
	(21%)	(27%)	(20%)
Total workforce of underrepresented gender	29%	32%	29%

During 2021, we have increased collaboration with local educational institutions to increase awareness of the opportunities for non-academic jobs as well as the opportunities that exist in the local environment.

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.

# of apprentices in TCM group	2021	2020	2019
	13	16	17

TCM Group does not accept discrimination of any kind, e.g., regarding age, nationality, gender, religion, sexual orientation, disability, etc.

We operate in an industry where several jobs traditionally have an overrepresentation of one gender. 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, culture, educational background, age, and personality. Therefore, we try to the best of our ability to create balanced teams by supporting diversity throughout 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.

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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

	2021	2020	Total [ton CO2]	Percent of total
Scope 1 (GRI: G4-EN15)	1,299	1,435	2,340	100%
Scope 2 (GRI: G4-EN16)	1,041	1,703

	2021	2020	Total [ton CO2]	Percent of total
Scope 1 (GRI: G4-EN15)	55%	46%	2,340	100%
Scope 2 (GRI: G4-EN16)	45%	54%

| Total | 2,340 | 3,138 | | |

UN Global Compact principles: 7, 8, 9

A high degree of this decrease was due to the fact that during 2021, TCM Group has 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 is 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 decreased to 2,340 ton CO2. The reduction, combined with a higher activity level, means that our emission in 2021 was 2.1 ton CO2 per 1 mDKK net revenue.

Emission per 1 mDKK net revenue in ton CO2e/mDKK	2021	2020
	2.1	3.1

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 measures the indirect emissions via our electricity and heat consumption. Further information about the GRI standards is available at www.globalreporting.org/standards.

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.

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

Co2 emission 2021	Transport reduction 2021	2020
8%	7%
Electricity 25%		44%
Heating 48%		39%

The shift in the distribution of our CO2 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 service cars now being included into the TCM Group company car fleet.

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 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).

Chairman and CEO’s report Financial Highlights Our business Corporate governance ESG Financial statements

TCM Group Annual report 2021 34

Electricity consumption

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.

Waste

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 consumption of materials and optimize processes 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. 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/

In 2021 the distribution of waste was as illustrated below	*Based on tons waste.

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 decrease in the Group’s production waste related to chipboard is directly recycled into new chipboard.# TCM Group Annual report 2021

Chairman and CEO’s report

Financial Highlights

Our business

Corporate governance

ESG

Energy recovery

2021: 7.7
2020: 12.8
2019: 13.1

Recycle Electricity consumption (KWH) per KDKK Revenue

2021: 0.5%
2020: 0.38%
2019: 0.02%

Hazardous waste

2021: 7.7
2020: 12.8
2019: 13.1

Landfill

2021: 7.7
2020: 12.8
2019: 13.1

This is why the level of waste material recycled is high. consumption of electricity in relation to revenue during 2021.

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

of certiﬁcate: 7

Extended lifecycle

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

Certiﬁed sustainable forestry is a guarantee that reforestation and good working conditions are secured and biological diversity is preserved.

Sustainable forestry by 2022

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.

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% 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

Country	Percentage
Denmark	23%
Germany	16%
Italy	12%
Sweden	3%
Netherlands	3%
Austria	0%
Europa others	6%
Asia	9%

*based on total purchasing spend

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.

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.

There have been no incidents violating the anti- corruption policy in 2021

Financial statements

Revenue

	Percentage
Manufacture of kitchen furniture according to EU Taxonomy	71%
Agents involved in the sale of furniture, household goods, hardware and ironmongery	29%

CAPEX

16.8% Total CAPEX vs.

C 31.02 G 46.15# Chairman and CEO’s report

Financial Highlights

Our business

Corporate governance

ESG

Financial statements

TCM Group Annual report 2021 39

Consolidated financial statements

Income statement

Statement of comprehensive income

DKK’000	Note	2021	2020	DKK’000	Note	2021	2020
Revenue	3	1,108,274	1,024,588	Net profit for the year		110,709	102,243
Cost of goods sold	4, 5, 7	(853,673)	(751,769)	Other comprehensive income
Gross profit		254,601	272,819	Items that may be reclassified subsequently to profit or loss
Selling expenses	4, 5, 7	(70,097)	(78,440)	Value adjustments of currency hedges before tax	8	691	554
Administrative expenses	4, 5, 7	(46,749)	(54,662)	Tax on value adjustments of currency hedges		(615)	(787)
Other operating income		0	0	Other comprehensive income for the year		76	(233)
Operating profit before non-recurring items		137,756	139,717	Total comprehensive income for the year		111,294	101,628
Non-recurring items
Operating profit	8	137,756	139,717
Share of profit/loss in associated companies	9	585	554
Financial income	9	338	269
Financial expenses		(3,600)	(4,265)
Profit before tax		134,717	135,738
Tax for the year	10	(23,423)	(25,029)
Net profit for the year		110,709	110,709
Earnings per share before dilution, DKK	19	11.55	10.22
Earnings per share after dilution, DKK	19	11.54	10.22

TCM Group Annual report 2021 41

Balance sheet as of 31 December

DKK’000	Note	2021	2020	DKK’000	Note	2021	2020
ASSETS				SHAREHOLDERS’ EQUITY AND LIABILITIES
Intangible assets				Share capital	17, 19	1,000	1,000
Goodwill	11	369,796	171,961	Treasury shares	17	(135,976)	0
Other intangible assets		4,561	1,697	Retained earnings		546,318	543,454
Value adjustments of cash flow hedges		(614)	546	Proposed dividend for the year	20	11,774	11,855
		373,743	174,204	Total shareholders’ equity		423,116	556,309
Tangible assets				Deferred tax	21	53,692	53,220
Land and buildings	12	419,691	443,987
Tangible assets under construction and prepayments	12	130,000	574,373
Machinery and other technical equipment	12	47,439	15,189
Equipment, tools, fixtures and fittings	12	8,524	1,132
		595,654	1,018,892
Other financial assets	13	97,838	55,963
Investments in associated companies	9	748,302	13,239

Total non-current assets		1,717,537	1,246,598
				Mortgage loans	2, 22	160,701	133,252
				Bank loans	2, 22	11,222	9,716
				Lease liabilities	2, 22	2,813	2,804
				Other liabilities		9,925	10,885
				Total long-term liabilities		184,661	156,657
Inventories	14	46,104	25,359
Raw materials and consumables		21,929	16,070
Products in progress		9,731	6,827
Finished products		14,444	3,162
Prepayments from customers	2	158,924	125,370
Other liabilities	14	77,764	52,227
Liabilities to associated companies	2	2,934	9,038
Total short-term liabilities		285,726	211,994

Current receivables
Trade receivables	2	28,235	24,395
Other receivables	2	31,505	23,742
Tax receivables		6,395	5,038
Prepaid expenses and accrued income	16	3,235	11,884
Cash and cash equivalents	15	159,019	131,683
Assets held for sale	27	0	53,611
Total current assets		228,389	249,753
Total assets		2,223,919	1,496,351	Total shareholders’ equity and liabilities		2,033,377	1,426,857

TCM Group Annual report 2021 42

Statement of changes in shareholders' equity

DKK’000	Share capital	Treasury shares	Value adjustments of currency hedges	Retained earnings	Proposed dividend	Total shareholders’ equity
Opening balance 01.01.2021	1,000	0	(614)	443,987	130,000	574,373
Net profit for the year	0	0	0	110,709	0	110,709
Other comprehensive income for the year	0	0	585	0	0	585
Total comprehensive income for the year	0	0	585	110,709	0	111,294
Purchase of treasury shares	0	(135,976)	0	0	0	(135,976)
Closing balance 31.12.2021	1,000	(135,976)	(29)	554,696	130,000	549,791

DKK’000	Share capital	Value adjustments of currency hedges	Retained earnings	Proposed dividend	Total shareholders’ equity
Opening balance 01.01.2020	1,000	0	419,244	52,500	472,744
Net profit for the year	0	0	102,243	0	102,243
Other comprehensive income for the year	0	(614)	0	0	(614)
Total comprehensive income for the year	0	(614)	102,243	0	101,629
Dividend paid*	0	0	(130,000)	(130,000)	(130,000)
Closing balance 31.12.2020	1,000	(614)	391,487	0	392,473

At the general meeting on 11 June 2020, it was concluded that no dividend were to be distributed regarding the financial year 2019.

TCM Group Annual report 2021 43

Cash flow statement

DKK’000	2021	2020	DKK’000	Note	2021	2020
Operating activities
Operating profit	138,447	134,717	Cash flow from operating activities		101,048	101,048
Depreciation/amortization	16,918	21,341
Other non-cash operating items related to the merge of the e-commerce activities	(17,342)	(25,899)	Investing activities
Income tax paid	(31,156)	(9,555)	Investments in tangible assets		(30,993)	(202)
Change in inventories	5,132	0	Investments in intangible assets		(4,466)	(8)
Change in operating receivables	(9,555)	(4,855)	Sale of financial assets		0	(308)
Change in operating liabilities	21,759	(31,156)	Dividend paid		0	(130,000)
	172,355	88,748	Purchase of treasury shares		(135,976)	0
Cash flow from operating activities	172,355	88,748	Acquisition of operations	24	(23,200)	4,600
			Divestments of operations		0	0
			Cash flow from investing activities		(194,635)	(126,000)

Financing activities
Interest paid	(2,897)	(3,263)
Proceeds and repayments of loans	137,878	(100,294)
Repayments of lease liabilities	(5,168)	(4,237)
Purchase of treasury shares	(135,976)	0
Dividend paid	(130,000)	0
Cash flow from financing activities	(136,163)	(107,794)

Cash flow for the year	(52,277)	(135,046)
Cash and cash equivalents at the beginning of the year	131,683	272,555
Cash and cash equivalents at year-end	79,406	131,683
Cash and cash equivalents assets held for sale	53,611	0
Cash and cash equivalents at year-end	133,017	131,683

TCM Group Annual report 2021 44

Notes to the consolidated financial statements

1. Accounting policies

2. Financial risks# TCM Group Annual Report 2021

3. Chairman and CEO’s report

4. Financial Highlights

5. Our business

6. Corporate Governance

7. ESG

8. Financial statements

9. 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 technical XBRL files enabling mechanical retrieval of the XBRL data incorporated.

Impairment testing of goodwill and brand

Goodwill and brand with indefinite useful life are recognized at cost less any accumulated impairment. The Group regularly and at least annually performs impairment tests of goodwill and brand in accordance with the accounting policies. The assumptions and assessments made pertaining to expected cash flows and the discount rate in the form of weighted average cost of capital are described in note 11, Intangible assets.

General principles

Assets and liabilities are recognised at historic acquisition 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

The Commission Delegated Regulation (EU) 2019/815 on the European Single Electronic Format (ESEF Regulation) requires the use of a particular electronic reporting format for annual reports of listed companies in the EU. More specifically, the ESEF Regulation requires the annual report to be prepared in XHTML format with iXBRL tagging of the statement of comprehensive income, balance sheet, cash flow statement and statement of changes in equity in the consolidated financial statements.

TCM Group A/S’ iXBRL tagging has been made using the ESEF taxonomy disclosed in the annexes to the ESEF Regulation and developed based on the IFRS taxonomy published by the IFRS Foundation. The 2020 version of the ESEF taxonomy has been used in the annual report for 2021.

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 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.

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.

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 consolidated financial statements. There are no amendments to accounting policies with future application that are deemed to have any material effect on the consolidated financial statements.

The company rents properties for production and for retail leases. Often leases do not have a fixed expiry date, but continue after the non-cancellable period until the lessee terminates the contract. The company therefore assesses whether it is reasonably certain of exercising extension options or failing to exercise termination options when determining the lease term. For both production buildings and retail leases, the lease term is estimated to be 5 years.

Significant accounting estimates and judgements

Preparing the consolidated financial statements in accordance with IFRS requires that Management makes assessments, estimates and assumptions that affect the application of accounting policies and the recognized amounts of assets, liabilities, income and expenses. The actual outcome may differ from these estimates and assessments. Estimates and assumptions are regularly reviewed. Changes to estimates are recognized in the period in which the change is made if the change affects only that period, or in the period in which the change is made and future periods if the change affects both current periods and future periods. Assessments made by Management in the application of IFRS that have a material impact on the consolidated financial statements and estimates made that may lead to significant adjustments in the consolidated financial statements of future financial years are primarily the following:

Classification, etc.

Non-current assets essentially comprise amounts that are expected to be recovered more than 12 months after the balance sheet date. Current assets essentially 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 comprise short-term liabilities.

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 combinations)
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 2. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30.# Notes to the consolidated financial statements (continued)

1. Accounting policies (continued)

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:

Rental contracts for premises
Vehicles

Assets and liabilities held for sale

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

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

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.

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.

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.

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.

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.

Segment reporting

An operating segment is a part of the Group that con- ducts business activities from which it earns revenue and incurs expenses and for which independent ﬁnan- cial information is available. Furthermore, the results of an operating segment are monitored by the 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

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.

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.

When controlling interests are achieved, changes in ownership are recognized as a reallocation of share- holders’ equity between the parent company’s owners and the non-controlling interest, without any remeas- urement and related supply chain disrubtions. Such costs are non-recurring in nature.

Financial income and expenses

Financial income and expenses comprise interest income on bank balances and receivables, interest expense on loans, gain/loss on interest rate swaps as well as exchange rate diﬀerences on ﬁnancial items.

Interest income on receivables and interest expense on liabilities are calculated in accordance with the 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.

Revenue recognition

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.

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- tions.

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 share- holders’ equity, whereby the associated tax eﬀects are recognized in other comprehensive income or in shareholders’ equity.

Current tax is tax that is to be paid or received 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.

Deferred tax is calculated according to the balance-sheet method on all temporary diﬀerences arising between recognized and ﬁscal values of assets and liabilities.

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.

Depreciation

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:

Asset Type	Useful Life (Years)
Buildings	36–40 years
Machinery and other technical equipment	3-10 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. Product development within the Group is mainly in the form of design development and is conducted continu- ously to adapt to current style trends.# 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

A financial asset or a financial liability is entered in the balance sheet when the company becomes a party in accordance with the contractual terms of the instrument. A receivable is recognized when the company has performed a service and a contractual payment obligation arises for the counterparty, even if an invoice has not been sent. Trade receivable are recognized in the balance sheet when revenue is recognized and an invoice has been sent. A liability is recognized when the counterparty has performed a service and a contractual payment obligation arises, even if an invoice has not been received. Accounts payable are recognized when a service or product has been received.

A financial asset is derecognized from the balance sheet when the rights resulting from the agreement have been realized, expire or the company loses control over them. The same applies to a part of a financial asset. A 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.

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 acquisition. Costs for repairs, maintenance and any interest expenses are recognized as costs in profit or loss in the period in which they arise.

Land is not depreciated.

Equipment, tools, fixtures and fittings
2-7 years

Intangible assets

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- ingly. Expected useful lives and residual values are reviewed annually.

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.

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.

Deferred tax

Deferred tax is measured 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.

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.

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 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.

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 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:
* The lease term is changed as a result of exercising an option to extend or shorten the lease term.
* 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 estimate of a residual value guarantee is changed.
* The contract is renegotiated or modiﬁed.

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.

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.

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.

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.

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.

for derivative instruments with negative values) are measured at amortized cost.

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 associates

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. Investments in associates are testet for impairment annualy.

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.

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.

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.# 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.

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.

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).

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.

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

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.

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.

Earnings per share

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.

Employee benefits

Long-term remuneration

The Group operates schemes for remuneration to employees for long service. The amount is deemed insigniﬁcant and the Group, therefore, recognizes the expense at the time of the anniversary. The Group has 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.

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.

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.

Impairment testing of financial assets

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. 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 allowances for expected credit losses and write- oﬀs for trade receivables are recognised in proﬁt or loss and included in administrative expenses.

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.

Loans and trade receivables

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.

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.

Dividends

Dividends are recognized as a liability after the Annual General Meeting has approved the dividend.# Notes to the consolidated financial statements (continued)

2. Financial risks

Foreign exchange risk

TCM Group A/S has limited currency exposure and risk, entirely related to sales in NOK, where hedging 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).

Credit risk

TCM Group A/S’ customer base comprises both professional customers and consumers. Credit management and payment terms are monitored for each customer group. The Group provides credit to professional customers whereas consumers usually do not get credit. Credit assessments are continuously performed on customers who make regular purchases. Credit insurance, bank guarantees and other collateral are utilized for the different markets and customer categories.

Changes in impairment of trade receivables in 2021 amounted to DKK 0.1 million and is recognized as an expense in the income statement.

Age analysis, trade receivable

	2021 DKK’000	2020 DKK’000
Non-due trade receivable	28,235	22,411
Past due trade receivable 0-30 days	1,902	1,015
Past due trade receivable 30-90 days	24,395	20,063
Past due trade receivable >90 days	3,511	860
Total overdue	3,968	6,886
Of which secured	3,046	0
Of which unsecured	937	6,886
Total overdue after impairment	5,308	3,043

Impairment loss recognized in the income statement during the period

	2021 DKK’000	2020 DKK’000
Impaired	3,840	2,779
(1,061)	977	977
4,331	2,265	2,265
25	683	683

Trade receivables as of 1 January 2020 amounted to DKK 22.3 million.

The provision of DKK 1.1 million constitutes 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.

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.

For the Group’s floating rate cash and cash equivalents and debt to banks, an increase in interest rate level of 1% p.a. relative to the actual interest rates would have a negative impact on the profit for the year and on equity at 31 December 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 expected losses.

Assumptions for analysis of interest-rate sensitivity

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.

Bank loans in Nordea with a nominal amount of DKK 20 million as of 31 December 2020 was repaid in 2021.

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.

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.

Liquidity risk

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.

Maturity structure, financial and operational liabilities – undiscounted cash flows

	0-6 months DKK million	6-12 months DKK million	1-5 years DKK million	5 years or later DKK million	Total DKK million
2021
Bank loans	160.7	30.6	26.4	158.9	53.4
Mortgage loans	1.0	1.0	11.9	15.3	0.0
Lease liabilities	165.4	32.4	0.0	0.0	11.9
Trade payables	(37)	(787)	158.9	50.1	1.1
Other liabilities	158.9	53.4	0.0	0.0	217.3
Total	158.9	53.4	158.9	217.3	436.9

Financial and operational liabilities at 31 December 2021

	0-6 months DKK million	6-12 months DKK million	1-5 years DKK million	5 years or later DKK million	Total DKK million
2020
Bank loans	19.6	33.4	5.1	1.5	5.1
Mortgage loans	1.5	10.2	11.9	24.3	0.0
Lease liabilities	20.4	20.4	0.0	0.0	35.4
Trade payables	35.2	125.4	79.4	5.5	5.3
Other liabilities	0.0	2.9	125.4	79.4	24.2
Total	35.2	125.4	79.4	24.2	189.9

Financial and operational liabilities at 31 December 2020

Fair value hierarchy of financial instruments measured at fair value in the balance sheet

The classification of financial instruments measured at fair value is disaggregated in accordance with the fair value hierarchy:

Quoted prices in an active market for identical instruments (level 1)
Quoted prices in an active market for similar assets or liabilities or other valuation methods where all significant inputs are based on observable market data (level 2)
Valuation methods in which any significant input is not based on observable marked data (level 3)

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).

During the financial period, the Group had no financial instruments in level 1 or 3.

The fair value of financial assets and financial liabilities measured at amortised cost is approximately equal to carrying amount, due to the short maturity of financial assets and the floating rate of the financial liabilities.

Carrying amount of derivative financial instruments:

	2021 DKK’000	2020 DKK’000
Hedging – currency fluctuation	(37)	(787)

3. Revenue and segment information

The Group’s business activities are managed within a single operating segment that is producing and selling kitchens, bathrooms and storage. Kitchens and related products cover products for kitchen. The result of the operating segment is monitored by the Group’s management to evaluate it and to allocate resources.

Revenue consists of sale of goods and services.

Revenue

	2021		2020
	Revenue DKK’000	Intangible assets	Revenue DKK’000	Intangible assets
Geographic areas
Denmark	1,011,380	96,894	692,339	0
Other countries	941,584	83,004	676,705	0
Total	1,952,964	179,898	1,369,044	0

Revenue from customers

	2021 DKK’000	2020 DKK’000
Denmark	1,011,380	692,339
Other countries	941,584	676,705
Total revenue	1,952,964	1,369,044

4. Staff Costs

Total costs for employee benefits

	2021 DKK’000	2020 DKK’000
Salaries and other remuneration	206,347	194,433
Social security costs	5,806	4,811
Pension costs – defined contribution plans	25,328	23,585
Other staff costs	210	168
Total costs for employees	237,691	222,998

Remuneration and other benefits

	Number of individuals	Base salary DKK’000	Variable fees DKK’000	Directors remuneration DKK’000	Other benefits DKK’000	Pension costs DKK’000	Total DKK’000
2021
Board of Directors	0	0	0	0	0	0	0
Executive Management	10	2,198	5,929	8,127	5	377	383
Total	10	2,198	5,929	8,127	5	377	383

	Number of individuals	Base salary DKK’000	Variable fees DKK’000	Directors remuneration DKK’000	Other benefits DKK’000	Pension costs DKK’000	Total DKK’000
2020
Board of Directors	0	0	0	0	0	0	0
Executive Management	5	2,004	2,004	7,365	481	481	2,004
Total	5	2,004	2,004	7,365	481	481	2,004

5. Average number of employees during the period

Employees including the Board of Directors and Executive Management have the opportunity to buy kitchens, 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.# Notes to the consolidated financial statements (continued)

6. Audit fee

Executive Management

Executive Management, which in 2021 in average totals 2 individuals, received salaries and benefits during 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 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 performance 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.

The LTI is applicable for the period 2021-2023 and consists of annually commencing individual Performance 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.

The LTI program for 2021-2023 is to be paid out in 2024 depending on the performance on the above mentioned criterias. The expected vesting level is depending on the performance 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.

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.

	2021	2020
Average number of employees	504	483
Of which women	2	2
Board members	5	5
Of which women	0	0

The remuneration report for the Board of Directors and the Executive Management is available on TCM Group´s website.

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
Statutory audit	595	595
Other assurance engagements	30	73
Tax and indirect taxes advisory	5	13
Other services	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.

7. Depreciation/amortization and impairment by function

DKK’000	2021 Depreciation/ amortization	2020 Depreciation/ amortization
Cost of goods sold	12,562	9,489
Selling expenses	1,060	1,203
Administrative expenses	10,649	0
Total depreciation/amortization and impairment	24,271	10,692

8. Non-recurring items

DKK’000	2021	2020
Costs related to Covid-19 and supply chain disruptions	14,010	5,000
Restructuring	1,300	0
Net gain from the Celebert/kitchn.dk transaction	(13,503)	(2,498)
Gain from the divestment of an own operated store	(691)	0
Total	1,116	2,502

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	1,024,588
Cost of goods sold	(869,583)	(756,769)
Gross profit	238,691	267,819
Selling expenses	(71,675)	(78,440)
Administrative expenses	(48,536)	(54,662)
Other operating income	19,966	0
Operating profit	138,447	134,717

9. Financial income and expenses

DKK’000	2021	2020
Financial income
Interest income on financial assets measured at amortized costs	149	54
Interest income on discounted subleases	189	215
Financial expenses
Interest expense on liabilities measured at amortized costs	(3,220)	(3,840)
Interest expenses on discounted lease liabilities	(380)	(425)
Total	(2,882)	(3,396)

10. Corporation tax

Tax for the year can be specified as follows:

DKK’000	2021	2020
Current tax	24,557	28,774
Change in deferred tax during the year	472	(296)
Total	25,029	28,477

Tax for the previous year can be specified as follows:

DKK’000	2021	2020
Current tax	165	(173)
Change in deferred tax during the year	0	0
Total	165	(173)

Reconciliation of the effective tax rate for the period can be specified as follows:

DKK’000	2021	%	2020	%
Tax rate	29,816	22.0	28,760	22.0
Non-taxable income	(4,468)	(3.3)	(612)	(0.5)
Non-deductible expenses	293	0.2	(322)	(0.2)
Other	(276)	(0.2)	0	0.0
Effective tax rate for the year	25,365	18.5	27,826	21.8

11. Intangible assets

DKK’000	2021	2020
Goodwill
Opening carrying amount	369,796	369,796
Closing carrying amount	369,796	369,796
Brand
Opening carrying amount	171,961	171,961
Closing carrying amount	171,961	171,961
Total	541,757	541,757

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).

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 storage”, hence the acquired goodwill has been allocated here to.

Goodwill and brand are subject to an annual impairment test by calculating the expected recoverable amount of the CGU. The recoverable amount is calculated as the expected cash flow discounted by a weighted average cost of capital (WACC) after tax for the CGU. The recoverable amount, calculated in conjunction with this, is compared with the carrying amount, 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 expectations regarding market trends in the years ahead, which reflects previous experience.

When calculating the expected cash ﬂow, significant assumptions applied include expected demand, growth in net sales, operating margin and working capital 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 strategic initiatives, comprising differentiated brands, a Group-wide range, central sourcing and product development. In order to extrapolate the cash ﬂows beyond the first five years, a growth rate of 2% (2%) is applied.

The weighted average cost of capital is calculated on the average debt/equity ratio for large companies in similar industries and costs of debt and equity. The cost of 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 estimated risks assumed when they invest in cash generating units. The risk premium has been established 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 business unit. The required return on debt financed capital is also calculated on the return on risk-free government bonds and by applying a borrowing margin based on an estimated company-specific risk. The current tax rate of 22% is applied. In 2021, the Group’s weighted cost of capital before tax amounted to 8.6% (8.4%) and after tax to 6.7% (6.6%).

Testing of goodwill and brand did not lead to any impairment in 2021 or 2020. In management’s assessment, likely changes in the basic assumptions will not lead to the carrying amount exceeding the recoverable amount.

12. Tangible assets

Tangible assets	Land and buildings	Machinery and equipment	Testing equipment, tools	Fittings	Other tangible assets	Total
2021
Opening carrying amount	202,398	31,019	2,657	16,927	15,199	268,100
Additions	2,322	2,322	0	1,908	579	7,131
Depreciation	(16,100)	(2,920)	(1,014)	(3,570)	(1,983)	(25,587)
Closing carrying amount	188,620	30,421	1,643	15,265	13,795	259,744
2020
Opening carrying amount	216,739	30,453	3,185	19,575	18,524	288,476
Additions	2,130	500	0	2,143	246	5,019
Depreciation	(16,471)	(0)	(528)	(4,753)	(3,976)	(25,728)
Closing carrying amount	202,398	31,019	2,657	16,927	15,199	268,100

12. Tangible assets (continued)

Tangible assets DKK’000	Buildings	Land and land improvements	Machinery and equipment, fixtures and fittings	Tools, fixtures	Software	Franchise set-up
2021
Opening cost at 1 January 2021	95,002	6,833	11,855	33,286	13,700	4,273
Investments for the period	5,023	160	6,833	155	11,575	(11,657)
Transfer	0	0	0	0	0	0
Disposals for the period	(5,215)	0	(2,726)	0	0	0
Closing cost amount at 31 December 2021	94,971	6,988	11,773	33,286	15,247	4,561
Opening depreciation and impairment at 1 January 2021	14,722	(2,097)	4,232	0	5,590	(1,780)
Investments for the period	7,994	0	0	0	0	0
Disposals for the period	(336)	0	0	0	0	0
Depreciation for the period	7,112	(1,780)	3,292	0	1,260	1,697
Closing depreciation and impairment at 31 December 2021	14,054	(3,877)	7,524	0	6,850	(83)
Opening amortization	47,927	1,400	40,173	0	16,858	78,113
Amortization for the period	0	0	0	0	0	0
Disposals for the period	0	0	0	0	0	0
Closing accumulated amortization	47,927	1,400	40,173	0	16,858	78,113
Closing carrying amount at 31 December 2021	46,990	1,711	4,250	33,286	8,397	(73,552)
Of which: Opening carrying amount at 1 January 2021	13,315	0	2,129	1,832	4,561	0
Investment for the period	0	0	0	0	0	0
Disposals for the period	(1,450)	0	0	0	0	0
Depreciation for the period	(631)	0	0	0	(3,118)	0
Closing carring amount at 31 December 2021	11,234	0	2,129	1,832	1,443	0

Tangible assets DKK’000	Buildings	Land and land improvements	Machinery and equipment, fixtures and fittings	Tools, fixtures
2020
Opening cost at 1 January 2020	89,195	6,833	11,042	33,112
Investments for the period	5,806	0	4,875	13,373
Disposals for the period	(763)	0	0	(13,199)
Reclassiﬁcation to assets held for sale	(1,454)	0	0	0
Closing cost amount at 31 December 2020	95,002	6,833	11,855	33,286
Opening depreciation and impairment at 1 January 2020	9,557	0	5,059	0
Disposals for the period	0	0	0	0
Depreciation for the period	5,164	0	3,364	0
Reclassiﬁcation to assets held for sale	(1,415)	0	0	0
Closing depreciation and impairment at 31 December 2020	14,722	0	8,423	0
Closing carrying amount at 31 December 2020	80,280	6,833	3,432	33,286

Of which right-of-use assets

DKK’000	Buildings
Opening carrying amount at 1 January 2020	13,315
Investment for the period	1,043
Disposals for the period	(26)
Depreciation for the period	(3,408)
Closing carring ammount at 31 December 2020	10,924

DKK’000	Buildings	Land and land improvements	Machinery and equipment, fixtures and fittings	Tools, fixtures	Other intangible assets	Software	Franchise set-up
2021
Opening carrying amount at 1 January 2021	94,971	6,833	11,773	33,286	15,247	4,561	0
Investments for the period	5,023	160	6,833	155	0	11,575	0
Disposals for the period	(5,215)	0	(2,726)	0	0	0	0
Depreciation for the period	(2,726)	(1,780)	(1,538)	0	0	(3,118)	0
Closing carrying amount at 31 December 2021	97,053	5,213	14,342	33,441	15,247	12,998	0

DKK’000	Buildings	Land and land improvements	Machinery and equipment, fixtures and fittings	Tools, fixtures
2020
Opening carrying amount at 1 January 2020	89,195	6,833	11,042	33,112
Investment for the period	5,806	0	4,875	13,373
Disposals for the period	(763)	0	0	(13,199)
Reclassiﬁcation to assets held for sale	(1,454)	0	0	0
Depreciation for the period	(7,779)	0	(2,726)	0
Closing carrying amount at 31 December 2020	87,000	6,833	13,191	33,286

Of which right-of-use assets

DKK’000	Buildings
Opening carrying amount at 1 January 2021	10,924
Investment for the period	152
Disposals for the period	0
Depreciation for the period	(1,744)
Closing carrying amount at 31 December 2021	9,332

No impairment was charged to tangible assets in 2021 or 2020.

13. Investments in associated companies

DKK’000	2021	2020
Cost at start of year	0	0
Additions	0	0
Carrying amount at end of year	0	0
Value adjustments at start of year	0	0
Dividend received	554	0
Share of proﬁt/(loss)	(14,292)	0
Value adjustments at end of year	(13,738)	0
Carrying amount as at end of year	(13,184)	0

The associated company Celebert ApS has balance sheet date as at 30 June.
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.

14. Inventories

DKK’000	2021	2020
Raw materials and consumables	46,104	22,929
Products in progress	9,931	25,359
Finished products	17,195	7,127
Total write-down of inventories	(1,200)	(1,425)
Total	77,764	48,255

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.

15. Other financial assets and other receivables

DKK’000	2021	2020
Other financial assets
Subleases	61,178	0
Deposits	7,559	965
Total	68,737	965
Other receivables
Subleases	7,120	5,888
Other receivables	24,384	17,854
Total	31,504	23,742

Subleases are speciﬁed as follows:

Undiscounted value DKK’000	Book value	Undiscounted value	Book value	Undiscounted value	Undiscounted value
2021		2020		2021	2020
Falling due for payment within one year	7,120	7,337	5,888	6,068
Falling due for payment within one and two years	7,234	7,379	6,253	6,166
Falling due for payment within two and three years	6,289	222	6,289	222
Falling due for payment within three and four years	0	0	0	0
Falling due for payment within four and ﬁve years	0	0	0	0
Falling due for payment later	14,679	14,836	18,432	18,723
Total	35,322	32,774	36,862	31,179

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.

16. Prepaid expenses and accrued income

DKK’000	2021	2020
Other prepaid expenses	3,235	438
Total	3,235	438

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.

17. Share capital

No. of registered shares	No. of shares outstanding	Nominal value
As of 1 January 2021	10,000,000	10,000,000
As of 31 December 2021	10,000,000	10,000,000
As of 1 January 2020	10,000,000	10,000,000
As of 31 December 2020	10,000,000	10,000,000

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
Purchase of treasury shares
As of 31 December 2021	83,223	135,976	83,223
As of 1 January 2020	0	0	0
As of 31 December 2020	0	0	0

18. Value adjustments of currency hedges

DKK’000	Value adjustment of cash flow hedges	Total	Value adjustment of cash flow hedges	Total
2021		2021	2020	2020
Opening balance	(614)	(614)	0	0
Value adjustments of currency hedges before tax	750	750	(787)	(787)
Tax on value adjustments of currency hedges	(165)	(165)	173	173
Closing balance	(29)	(29)	(614)	(614)

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.

19. Earnings per share

DKK	2021	2020
Proﬁt attributable to shareholders (DKK'000)	110,709	102,243
Weighted average number of outstanding ordinary shares before dilution	10,000,000	10,000,000
Earnings per share before dilution (DKK)	11.55	10.22

Earnings per share before dilution are calculated by dividing proﬁt attributable to the shareholders by the weighted average number of outstanding ordinary shares during the period.

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.
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%.

21. Deferred tax

DKK’000	Deferred tax assets	Deferred tax liabilities
Opening balance, 1 January 2021	0	53,220
Recognized in net proﬁt for the year	472	53,692
Closing balance, 31 December 2021	472	106,912

DKK’000	Deferred tax assets	Deferred tax liabilities
Opening balance, 1 January 2020	0	53,516
Recognized in net proﬁt for the year	0	(296)
Closing balance, 31 December 2020	0	53,220

The change in deferred tax liabilities for the period:

Temporary differences in intangible assets	Temporary differences in tangible assets
53,220	53,220

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 dividend during 2022 in the range DKK 25-75 million.

22. Bank loans and mortgage loans

Refer to note 2 for additional information regarding bank loans and mortgage loans. During 2021, an extraordinary repayment has been made on bank loans of DKK 10.0 million (DKK 86.0 million).

23. Financial assets and liabilities

DKK’000	2021	2020
Financial assets measured at amortized cost	11,049	20,587
Financial liabilities measured at amortized cost	16,776	19,759
Derivative instruments measured at fair value	2,805	12,738
Total carrying amount	30,630	53,085

DKK’000	Within 1 year	Between 1 and 5 years	Total
Other long-term receivables	0	695	695
Trade receivable	24,395	0	24,395
Total	24,395	695	25,090

DKK’000	2021	2020
Long-term interest-bearing liabilities	0	0
Current interest-bearing liabilities	0	0
Accounts payable	64,397	125,368
Total	64,397	125,368

DKK’000	2021	2020
Long-term other liabilities	23,623	24,187
Short-term current other liabilities	125,368	24,187
Total	148,991	48,374

DKK’000	2021	2020
Financial assets measured at amortized cost	965	11,884
Financial liabilities measured at amortized cost	28,235	41,084
Derivative instruments measured at fair value	0	0
Total carrying amount	29,200	52,968

DKK’000	Within 1 year	Between 1 and 5 years	Longer than 5 years	Total
Other long-term receivables	0	0	0	0
Trade receivable	0	0	0	0
Total	0	0	0	0

DKK’000	2021	2020
Long-term interest-bearing liabilities	0	0
Current interest-bearing liabilities	0	0
Accounts payable	43,014	158,924
Total	43,014	158,924

DKK’000	2021	2020
Long-term other liabilities	174,727	1,132
Short-term current other liabilities	158,924	1,132
Total	333,651	2,264

DKK’000	2021	2020
Cash and cash equivalents	125,855	150,946
Total	125,855	150,946

DKK’000	2021	2020
Cash and cash equivalents	787	292,817
Total	787	292,817

DKK’000	2021	2020
Cash and cash equivalents	0	41,084
Total	0	41,084

DKK’000	2021	2020
Cash and cash equivalents	0	11,884
Total	0	11,884

DKK’000	2021	2020
Cash and cash equivalents	0	52,968
Total	0	52,968

DKK’000	2021	2020
Cash and cash equivalents	292,030	55,242
Total	292,030	55,242

DKK’000	2021	2020
Cash and cash equivalents	54,455	292,030
Total	54,455	292,030

24. Acquisition of operations (business combinations)

On 6 July 2021, TCM Group entered into a strategic partnership with, and acquired stake in the fast growing Danish e-commerce kitchn business Celebert. TCM Group merged its e-commerce activities in kitchn.dk with the activities of Celebert and has initially acquired a 45% stake in Celebert. Cost related to the transaction amounted to DKK 4.0 million and are presented under non-recurring items.

Acquisition 45% af Celebert ApS

DKK’000	2021	2020
Assets held for sale	0	32,178
Purchase price	29,000	0
Total	29,000	32,178

DKK’000	Merged activities	Mortgage loans	Bank lease loans	Cash pool liabilities	Total
Opening balance, 1 January 2020	36,237	116,406	40,899	4,916	198,458
Non-cash change	0	0	0	0	0
Equity value of acquired net assets – 45%	(15,528)	45,650	(14,292)	31,358	47,188
New lease liabilities	0	0	0	0	0
Elimination of internal profit	(5,711)	0	0	0	(5,711)
Goodwill after elimination	735	0	0	0	735
Subleases settled directly from the franchisee	0	0	0	0	0
Amortization of borrowing costs	(795)	(60)	0	0	(855)
Financing cash flows	(2,794)	(97,500)	0	(5,168)	(105,462)
Repayment of loans	(2,794)	(97,500)	0	(5,168)	(105,462)
Closing balance, 31 December 2020	17,011	64,506	26,607	31,106	139,230

DKK’000	Merged activities	Mortgage loans	Bank lease loans	Cash pool liabilities	Total
Opening balance, 1 January 2021	17,011	64,506	26,607	31,106	139,230
Non-cash change	0	0	0	0	0
New lease liabilities	3,184	(411)	0	0	2,773
Subleases settled directly from the franchisee	359	(7,061)	0	0	(6,702)
Amortization of borrowing costs	(4,288)	(3,920)	0	0	(8,208)
Financing cash flows	(2,823)	(20,000)	0	(4,237)	(27,060)
Repayment of loans	(2,823)	(20,000)	0	(4,237)	(27,060)
Closing balance, 31 December 2021	13,443	33,114	26,607	22,670	96,934

Goodwill is attributable to future expected growth potential and expected synergies with the merger of our e-commerce activities in kitchn.dk with Celebert ApS.

25. Changes in liabilities attributable to the financing activities

In 2021, the total amount of cash flows related to lease liabilities was DKK 8.5 million, of which the interest payments related to the recognized lease liabilities were DKK 0.2 million and repayments DKK 4.2 million.

DKK’000	2021	2020
Mortgage loans	30,630	33,443
Bank lease loans	0	19,641
Cash pool liabilities	160,701	34,936
Total	191,331	88,020

DKK’000	2021	2020
Mortgage loans	0	0
Bank lease loans	160,701	0
Cash pool liabilities	26,411	0
Total	187,112	0

26. Pledged assets, contingent liabilities and commitments

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 commercial operations. No significant liabilities are expected to arise through these contingent liabilities.

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).

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). Other bank guarantees amount in total to DKK 0.3 million (DKK 0.3 million).

27. Assets and liabilities held for sale

Assets and liabilities held for sale consists in 2020 of assets and liabilities related to the Svane Køkkenet store in Copenhagen, which has been sold with effect from 5 January 2021.

DKK’000	2021	2020
Assets held for sale	0	3,667
Liabilities held for sale	0	4,890
Total	0	8,557

DKK’000	2021	2020
Tangible fixed assets	0	1,504
Trade receivables	0	5,828
Inventories	0	747
Cash and cash equivalents	0	0
Prepaid expenses and accrued income	0	0
Total	0	8,079

DKK’000	2021	2020
Prepayments from customers	0	0
Trade payables	0	0
Other liabilities	0	3,001
Total	0	3,001

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

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.

29. 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.

30. Companies in the TCM group

Business	Shareholding	Domicile	registration no
Parent company
TCM Group A/S		Holstebro	37291269
Subsidiaries
TMK A/S	100%	Holstebro	75924712
Nettoline A/S	100%	Aulum	31599555
Associated companies
Celebert ApS	45%	Aalborg	27428959

Apart from the above mentioned, shareholdings in subsidiaries and associated companies are unchanged compared to last year.

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
EBITDA margin	EBITDA * 100 / Revenue
EBITA margin	EBITA * 100 / Revenue
Adjusted EBITA margin	Adjusted EBITA * 100 / Revenue
EBIT margin	EBIT * 100 / Revenue
Solvency ratio	Equity * 100 / Balance sheet total
Leverage ratio	Net interest-bearing debt excluding tax liabilities / 12 months adjusted EBITDA
NWC ratio	Net working capital (1) * 100 / 12 months revenue
Capex ratio excl. acquisitions	Capex ratio excluding acquisitions is calculated as investments in tangible assets (capex) divided with revenue. Capex is exclusive investments in connection with acquisitions.

Following key figures are not directly derived from the face of the income statement or balance sheet and as such are defined as follows:

Adjusted EBITDA: Operating profit before non-recurring items (Adjusted EBIT) plus depreciation and amortization.
Adjusted EBITA: Operating profit before non-recurring items (Adjusted EBIT) plus amortization.
Net interest-bearing debt: Current and non-current interest-bearing loans and borrowings less interest-bearing receivables and cash and cash equivalents.
Net working capital: The sum of inventories, trade receivables, other receivables (excluding subleases) and prepayments less the sum of prepayments from costumers, trade payables and other liabilities.# 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

Income statement and statement of comprehensive income

DKK’000	Note	2021	2020
Revenue		8,000	5,704
Gross proﬁt		(14,041)	(8,337)
Administrative expenses	3	(12,051)	(4,051)
Operating loss before non-recurring items		(79)	(4,130)
Non-recurring items		(8,337)	(4,130)
Operating loss
Dividend from subsidiaries		150,000	100,000
Financial income	4	422	165
Receivables from subsidiaries		24,832	5,350
Deferred tax assets	4	6,395	5,050
Financial expenses	4	(2,126)	(2,662)
Proﬁt before tax		144,166	89,166
Tax for the year	5	1,231	2,384
Net proﬁt for the year		145,398	91,550

Other comprehensive income

DKK’000	2021	2020
Items that may be reclassiﬁed subsequently to proﬁt or loss
Value adjustments of cash-ﬂow hedges before tax	0	0
Tax on value adjustments of cash-ﬂow hedges	0	0
Other comprehensive income for the year	0	0
Total comprehensive income	145,398	91,550

TCM Group Annual report 2021 66

Balance sheet as of 31 December

DKK’000	Note	2021	2020
Assets
Non-current assets
Investments in subsidiaries	6	496,756	496,756
Financial non-current assets		496,756	496,756
Total non-current assets		496,756	496,756
Current assets
Tax receivables		33,500	78
Prepaid expenses and accrued income		10,768	5,050
Cash and cash equivalents	12	33,511	2,857
Total current assets		13,625	510,381
Total assets		530,267	510,381

TCM Group Annual report 2021 67

Balance sheet as of 31 December (continued)

Equity and liabilities	Note	2021	2020
Equity
Share capital		1,000	1,000
Treasury shares		0	0
Retained earnings		353,427	339,377
Proposed dividend		130,000	52,500
Total equity		484,427	392,877
Liabilities
Non-current liabilities
Bank loans	7	0	9,715
Other payables		1,132	4,878
Total non-current liabilities		1,132	14,593
Current liabilities
Bank loans	7	0	9,925
Trade payables		160,701	2,235
Payables to subsidiaries		1,525	826
Other payables		11,360	25,954
Total current liabilities		173,586	38,940
Total liabilities		174,718	53,533
Total equity and liabilities		659,145	446,410

Changes in shareholders’ equity

DKK’000	Share capital	Treasury shares	Retained earnings	Proposed dividend	Total
Opening balance 01.01.2021	1,000	0	353,427	130,000	484,427
Net proﬁt for the year	0	0	90,994	54,404	145,398
Total comprehensive income for the year	0	0	90,994	54,404	145,398
Purchase of treasury shares	0	(135,976)	0	0	(135,976)
Dividend paid	0	0	(130,000)	0	(130,000)
Closing balance 31.12.2021	1,000	(135,976)	314,421	54,404	363,849

DKK’000	Share capital	Retained earnings	Proposed dividend	Total
Opening balance 01.01.2020	1,000	339,377	52,500	392,877
Reversed proposed dividend*	0	52,500	(52,500)	0
Net proﬁt for the year	0	91,550	0	91,550
Total comprehensive income for the year	0	91,550	0	91,550
Dividend paid*	0	(38,450)	0	(38,450)
Closing balance 31.12.2020	1,000	353,427	130,000	484,427

* At the general meeting on 11 June 2020, it was concluded that no dividend were to be distributed regarding the ﬁnancial year 2019.

TCM Group Annual report 2021 68

Cash ﬂow statement

DKK’000	Note	2021	2020
Operating activities
Operating loss		(4,130)	(8,337)
Income tax paid		(851)	(5,732)
Change in operating receivables		(11,683)	(4,629)
Change in operating liabilities		33,543	(11,157)
Cash ﬂow from operating activities		(26,226)	(31,157)
Investing activities
Dividend received		150,000	100,000
Cash ﬂow from investing activities		150,000	100,000
Financing activities
Proceeds and repayment of loans		(97,500)	0
Purchase of treasury shares	8	(135,976)	0
Dividend paid	8	(130,000)	0
Cash ﬂow from ﬁnancing activities		(99,263)	(126,619)
Cash ﬂow for the year		(2,845)	(10,946)
Cash at start of year	12	2,857	13,803
Cash ﬂow for the year		(2,845)	(10,946)
Cash at end of year	12	2,857	2,857

TCM Group Annual report 2021 69

Notes to the parent financial statements

1. Significant accounting estimates and judgements

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. Subsidiaries are tested for impairment if events or other circumstances indicate that the carrying amount is not recoverable. Measuring subsidiaries requires signiﬁcant estimates to be made when making 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.

Particular estimation uncertainties and judgements made in respect of the Group is discussed in note 1 to the consolidated ﬁnancial statements.

2. Staff Costs

DKK’000	2021	2020
Salaries and other remuneration	7,341	8,728
Social security costs	21	16
Pension costs – deﬁned contribution plans	185	65
Total costs for employees	7,547	8,809

Further employee beneﬁts for executive management a.o. company car, phone etc. are presented as administration costs.

Remuneration and other benefits	Number of individuals	Base salary	Variable fees	Directors fees	Other benefits	Pension costs	Total
2021
Board of Directors	10	2,188	377	0	2,198	602	5,365
Executive Management	5	4,567	0	2,004	481	383	7,435
Total	15	6,755	377	2,004	2,679	985	12,800
2020
Board of Directors	16	2,188	0	0	2,204	481	4,873
Executive Management	5	4,536	0	2,004	481	383	7,404
Total	21	6,724	0	2,004	2,685	864	12,277

Refering to note 4 of the consolidated ﬁnancial statement for description of the Short-term Incentive program (STI) and Long-term Incentive program (LTI).

3. Audit fee

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
Statutory audit	574	150
Other assurance engagements	250	150
Other services	150	0
Total costs	974	300

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.

4. Financial income and expenses

DKK’000	2021	2020
Financial income
Interest income from subsidiaries	422	165
Total	422	165
Financial expenses
Interest expense on liabilities measured at amortized costs	(2,125)	(2,662)
Total	(2,125)	(2,662)
Total	(1,703)	(2,497)

5. Corporation tax

DKK’000	2021	2020
Tax for the year can be speciﬁed as follows:
Current tax	1,231	0
Total	1,231	0

DKK’000	2021	2020
Tax for the previous year can be speciﬁed as follows:
Current tax	2,384	0
Total	2,384	0

Reconciliation of the eﬀective tax rate for the year can be speciﬁed as follows:

DKK’000	% 2021	% 2020
Tax rate	22.0	22.0
Non-taxable income	(33,000)	(22,000)
Non-deductible expenses	(1,231)	(2,383)
Eﬀective tax rate for the year	(22.9)	(22.0)

6. Investments in subsidiaries

Investments in subsidiaries	Cost at start of year	Cost at end of year	Carrying amount at end of year
2021	496,756	496,756	496,756
2020	496,756	496,756	496,756

Investments in subsidiaries comprise: TMK A/S, 100%

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.

Refer to note 30 of the consolidated ﬁnancial statements for a list of all companies in the TCM Group.

7. Bank loans

DKK’000	Maturity structure	2020
	Within 1 year	9,925
	Between 1 and 5 years	0
	Longer than 5 years	0
Total		9,925

8. Changes in liabilities attributable to the financing activities

DKK’000	Bank loans	Cash pool	Total
2021	(135,976)	(130,000)	(265,976)
2020	0	0	0

9. Guarantees, contingent liabilities and collateral

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.

11. Events after the balance sheet date

There have been no events after the balance sheet date that require adjustment or disclosure in these financial statements.# Notes to the parent financial statements (continued)

10. Related parties

For specification of related parties refer to note 28 and 30 of the consolidated financial statements.

Referring to note 4 of the consolidated financial statements: Remuneration to Executive Management and Board of Directors.

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 impairment test is performed.

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.

12. Accounting policies

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.

Accounting policies are unchanged compared to last year.

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:

Investments in subsidiaries

Investments in subsidiaries are measured at cost in the parent financial statements. If an indication of impairment exists, then an impairment test is performed as described in the accounting policies for the consolidated financial statements. If the carrying amount exceeds the recoverable amount, investments are written down to such lower amount.

If distribution is made from reserves other than accumulated 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.

Capital management

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 leverage ratio as of 31 December 2021 is 1.33.

Dividend policy

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 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.

	Opening balance, 1 January 2021	Non-cash change	Amortization of borrowing costs	Repayment of loans	Changes in cash pool	Closing balance, 31 December 2021
Financing cash flows	19,641	0	359	(20,000)	0	160,701
Total	19,641	0	359	(20,000)	0	160,701

	Opening balance, 1 January 2020	Non-cash change	Amortization of borrowing costs	Repayment of loans	Dividend income	Closing balance, 31 December 2020
Financing cash flows	116,406	0	735	(97,500)	(97,500)	19,641
Total	116,406	0	735	(97,500)	(97,500)	19,641

Note: The table above is reconstructed from fragmented data in the input text. The original structure might differ.

13. Financial risks

Liquidity risks

Translation exposure

The Company does not have any subsidiaries in foreign countries, why there is no translation exposure.

Credit risk

The Company does not have any external activities. No material credit risk have been identified.

Financial exposure

Interest-rate risk

For the Company’s floating rate cash and cash equivalents and debt to banks, an increase in interest rate level of 1% p.a. relative to the actual interest rates would have a negative impact on the profit for the year and on equity at 31 December 2021 of DKK 1.6 million (DKK 0.2 million).

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. The computed expected fluctuations are based on the current market situation and expectations for the market developments in the interest rate level.

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.

Statement by Management on the annual 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.

Holstebro, 24 February 2022

Executive Management

Independent auditor's report

To the shareholders of TCM Group A/S

Report on the consolidated financial statements and the parent financial statements

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 comprehensive 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 statements 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.

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 operations 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 additional requirements of the Danish Financial Statements Act.

Other information

TCM Group A/S was listed on Nasdaq OMX Copenhagen 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 reappointed by decision of the Annual General Meeting for a total continuous engagement period of five years up to and including the financial year 2021.

We have been audited in accordance with the Accountants’ International Code of Ethics for Professional 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.

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.# Independent auditor’s report

Torben Paulin
Chief Executive Officer

Mogens Elbrønd Pedersen
Chief Financial Officer

Sanna Mari Suvanto-Harsaae
Chairman

Anders Tormod Skole-Sørensen
Deputy Chairman

Carsten Bjerg
Søren Mygind Eskildsen
Danny Feltmann Espersen

Statement on the management commentary

Management is responsible for the management commentary. 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. In connection with our audit of the consolidated financial statements and the parent financial statements, our responsibility is to read the management 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. 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 Financial Statements Act. We did not identify any material misstatement of the management commentary.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (ISAs) and the additional requirements applicable in Denmark. Our responsibilities under those standards and requirements are further 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 Accountants’ Code of Ethics for Professional Accountants (the Code) and the additional requirements applicable in Denmark. We have furthermore taken into account the additional ethical requirements applicable in Denmark. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key audit matters

Key audit matters are those matters that, in our professional 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.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated 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.

Our opinion is consistent with our audit book comments issued to the Audit Committee and the Board of Directors.

Management’s responsibilities for the consolidated financial statements and the parent financial statements

Management is responsible for the preparation of consolidated 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 enable the preparation of consolidated financial statements and parent financial statements that are free from material misstatement, whether due to fraud or error.

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 cease operations, or has no realistic alternative but to 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 conducted in accordance with ISAs and the additional requirements applicable in Denmark will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements and these parent financial statements.

As part of an audit conducted in accordance with ISAs and the additional requirements applicable in Denmark, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:

Identify and assess the risks of material misstatement of the consolidated financial statements and the parent financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s and the Parent’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by Management.
Conclude on the appropriateness of Management’s use of the going concern basis of accounting 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.
Evaluate the overall presentation, structure and content of the consolidated financial statements and the parent financial statements, including the disclosures in the notes, and whether the consolidated financial statements and the parent financial statements represent the underlying transactions and events in a manner that gives a true and fair view.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, 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.

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 Delegated Regulation (EU) 2019/815 on the European Single Electronic Format (ESEF Regulation), which includes requirements related to the preparation of the annual report in XHTML format and iXBRL tagging of the consolidated financial statements.

Management is responsible for preparing an annual report that complies with the ESEF Regulation.

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)

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)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 taxonomy 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 taxonomy, for financial information required to be tagged using judgement where necessary;
* Ensuring consistency between iXBRL tagged data and the consolidated financial statements presented in human readable format; and
* For such internal control as Management determines necessary to enable the preparation of an annual report that is compliant with the ESEF Regulation.
* Evaluating the use of anchoring of extension elements to elements in the ESEF taxonomy; and
* Reconciling the iXBRL tagged data with the audited consolidated financial statements.

In our opinion, the annual report of TCM Group A/S for the financial year 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 auditor’s judgement, including the assessment of the risks of material departures from the requirements set out in the ESEF Regulation, whether due to fraud or error. The procedures include:

Aarhus, 24 February 2022

Deloitte Statsautoriseret Revisionspartnerselskab
Business Registration No 33 96 35 56

Henrik Vedel
State-Authorised Public Accountant
Identification No (MNE) mne45823

Chris Middelhede
State-Authorised Public Accountant
Identification No (MNE) mne10052

AI assistant

TCM Group — Annual Report 2021

TCM Group A/S

Corporate Governance | TCM Group A/S

Revisionspåtegning

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

Our purpose

Chairman and CEO’s report

Financial Highlights

Our business

Corporate governance

ESG

Financial statements

About TCM Group

Chairman and CEO’s report

Financial Highlights

Our business

Corporate governance

ESG

Financial statements

Chairman and CEO’s report

Financial Highlights

Our business

Corporate governance

ESG

Financial statements

Chairman and CEO’s report

Chairman and CEO’s report

Financial Highlights

Our business

Corporate governance

ESG

Financial statements

Letter to our Shareholders

Financial Highlights

Financial Highlights

Our business

Our business

Key figures and ratios

Financial Highlights

Non-recurring items

Financial Ratios

Operating expenses - cost ratio

Development in activities and finances*

EBIT

Events after the balance sheet date

Our Business

Nettoline

Capri

Strategy

Financial outlook 2022

Strategy and financial targets

Strategic choices and initiatives in the growth strategy:

Forward looking statements

Chairman and CEO’s report

Financial Highlights

Our business

TCM Group’s production sites are located in Tvis and Aulum, with two factories in Tvis and one factory in Aulum.

Storage solutions

Store openings

ESG

Financial statements

Risk management

Currency risks

Financial risks

Liquidity risks

Interest rate risk

Chairman and CEO’s report

Financial Highlights

Our business

Corporate governance

ESG

Financial statements

Corporate governance

TCM Group Annual Report 2021