TCM Group Q1 2025 presentation: revenue up 5.3%, maintains positive outlook

TCM Group (CPH:TCM) reported a 5.3% year-over-year revenue increase in Q1 2025, reaching DKK 308 million, driven by strong B2C sales and growth in Norway. Gross margin improved to 21.1%, and adjusted EBIT rose to DKK 17 million, yielding a 5.6% margin. Despite negative free cash flow of DKK -4 million due to increased capital expenditures, TCM reaffirmed its 2025 guidance of DKK 1,250-1,400 million in revenue and DKK 90-120 million in adjusted EBIT, while also planning to acquire Celebert ApS in H2 2025.

Analysis

TCM Group A/S (CPH:TCM) reported a resilient Q1 2025, with year-over-year revenue growth of 5.3% to DKK 308 million and organic growth of 3.6%, despite challenging market conditions. This performance was primarily driven by strong B2C sales and a notable 11.2% sales increase in Norway. Despite these improvements and enhanced profitability—gross margin rose to 21.1% from 20.5% and adjusted EBIT margin improved to 5.6% from 5.4%—the company's shares experienced a modest decline of 1.8% to DKK 77.8 post-results, although they remain near the 52-week high. The company's balance sheet strengthened significantly, evidenced by a reduction in net interest-bearing debt to DKK 332 million and a decrease in the leverage ratio from 3.7 to 2.6. However, free cash flow turned negative to DKK -4 million, a sharp contrast to the DKK 13 million positive FCF in Q1 2024, attributed to a higher capex ratio of 2.2%; nevertheless, the last-twelve-months cash conversion rate remained strong at 76.8%. TCM Group reaffirmed its 2025 financial guidance, projecting net revenue of DKK 1,250-1,400 million and adjusted EBIT of DKK 90-120 million, supported by increased order intake across segments. The planned acquisition of Celebert ApS in H2 2025 is expected to further enhance market position, although persistent pressures from higher production and logistics costs remain a key operational challenge.

Key Decisions for Investors

• Investors should acknowledge TCM's sustained revenue and margin expansion in a challenging market, supported by reaffirmed 2025 guidance, indicating operational resilience.
• Careful monitoring of free cash flow trends is warranted, particularly concerning the impact of increased capital expenditure and the ongoing pressure from higher production and logistics costs on profitability.
• Consider the potential of the upcoming Celebert ApS acquisition and robust order intake as future growth drivers, while also evaluating the market's modest share price decline post-earnings against the company's fundamental improvements and proximity to its 52-week high.