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Upholstery group posts Q2 decline as market slows

Upholstery group TCM Living has reported a decline in second quarter sales within its British division.

According to its latest trading Q2 2023 update, TCM Corporation, the parent company of TCM Living, which houses UK brands Alstons, Ashley Manor, Alexander & James and AMX Designs, said that total group revenue from sales was recorded at 2,140.61 million baht compared to 2,384 million Baht in prior year, which was 10.23% decrease.

EBITDA was 176.55 million baht, an increase by 48.98% from previous year. Net profit was 27.30 million baht, a significant increase from those of 6.38 million baht in the previous year.

The group said that TCM Living experienced a slowdown in the market and saw a reduction in sales by 20%, reflecting the “unwinding of an unusually high Q1/2022 closing order book following shipping delays experienced in the latter part of 2021, which was gradually recovered this year”.

“Despite orders being challenged by the cost-of-living crisis, the Q2 revenue levels achieved in FY2023 are in line with management expectations,” the group added.

Sales were down 20.34% to 1,363.58 million baht (£30m) from 1,711.73 million baht (£38.4m). Net profit increased 44.43% to 19.25 million baht (£0.4m) from 13.33 million baht (£0.3m).

Commenting on TCM Living’s performance, the group said: “After a remarkable sales growth in Q2/2022, sales revenue in Q2/2023 was considered 20.34% behind YoY. This can be explained that the sales boost in Q2/2022 was mainly a benefit from shipping delay which was continued from the end of 2021.

“Despite the disturbing UK economy and increase in raw material price and labour cost, the company has managed to enhance efficiency which helped boost its gross profit margin from 14.12% last year to 20.15% this year.

“Overheads increased in overall as a result of the reduction in production capacity. This was mainly to respond to the lower demand in the market provided that lead time in product delivery was back to normal so that backlog sales orders were minimal.

“Gross Profit contribution of TCML reduced from Q2/2022 due to lower volumes but the margins achieved increased from 14.12%, as reported in the previous year to 20.15% this year.

“This increase reflected improved manufacturing efficiencies offsetting the current inflationary cost pressures along with the benefit of normalised container prices positively affecting the import side of the business.

“Selling and administrative expenses increased by 3.51% YoY due to cost-of-living increases and inflationary pressures. Once again, these costs were within management expectations. The group also incurred one-time-cost from the consolidation of manufacturing sites in Q1.

“Despite a significant increase in the UK cost of living inflation rates, Selling and Administrative expenses were increased by 3.51% YoY as we continuously strive to maintain an appropriate cost basis for the business, as demonstrated by the recent consolidation of the manufacturing sites in the Midlands which will realise significant savings in the future.

“The higher overheads have also included one-time cost incurred in Q1 and Q2/2023 as part of long-run overheads control exercise, in which the benefit to overall profitability can be seen in Q4/2023.”

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