2006 results contribute to securing the future of the LEGO Group
February 21 2007
The business strategy followed by the LEGO Group in recent years is the most significant reason for the company’s highly satisfactory 2006 results. This became clear at a press conference today, at which the LEGO Group presented its Annual Report.
The increase in revenue is evenly distributed on the Group’s markets, including
the market for direct sales to consumers. Particularly sales of the re-launched,
classic product lines such as LEGO CITY, LEGO DUPLO, and LEGO TECHNIC as well as
the re-launched LEGO MINDSTORMS have developed more positively than expected.
Moreover, inventories held by retailers at the beginning of 2006 were extraordinarily low. At the beginning of the year, these were increased to a healthier level. Finally, sales of LEGO Star Wars products were stronger than expected in a year without any related film releases.
The increased demand meant that the company was not entirely able to meet the demand from retailers during the year.
Following the financial reconstruction of the company in 2004 and 2005, the years 2006, 2007 and 2008 will focus on building a profitable core platform. The results for 2006 are to be seen as an important step in the implementation of the second phase of the strategy and therefore contribute to securing the company’s future.
New company structure in the LEGO Group
The simplification of the company structure which the LEGO Group has been working on in recent years is expected completed during the spring of 2007. The simplification means that, in future, all LEGO related activities on the toy market will be united in the LEGO A/S Group, and therefore the name ‘LEGO Group’ will in future refer to this entity.
LEGO Holding A/S is still the largest shareholder of LEGO A/S.
As LEGO A/S is now the operating company, the previous Board of Directors of LEGO Holding A/S will in future constitute the Board of Directors of LEGO A/S (board members are listed in the Annual Report).
The future Board of Directors of LEGO Holding A/S will consist of Mr. Kjeld Kirk Kristiansen (Chairman), Mr. Thomas Kirk Kristiansen, Mr. Mads Øvlisen and Mr. Peter Gæmelke.
Expectations for 2007
On the whole, the global toy market is expected to remain unchanged, and therefore the LEGO Group’s largest markets, the USA and Germany, are expected still to be under pressure in 2007.
On this basis, the LEGO Group expects slightly lower revenue in 2007 than in 2006.
The most significant challenge for the company in 2007 will be the continued changes in the business model, which particularly comprises the outsourcing of most of the production. The implementation of the outsourcing is not an easy task, and it is decisive that neither product quality nor delivery service is affected negatively.
2007 will see increased expenses in connection with both the outsourcing and investments in IT and innovation. Moreover, the results for 2007 are not expected to be positively affected by one-off income. Therefore, the profit before tax in LEGO A/S is expected to be in the region of DKK 550 million, while the profit before tax of LEGO Holding is expected to be in the region of DKK 750 million.
”I consider the results highly satisfactory”, says Mr Jørgen Vig Knudstorp, CEO.
”It clearly shows that there is plenty of life and relevance in the LEGO products and that our strategy of focusing on the core of our brand is the right approach. We are however very much aware that, despite the good results, we do not meet all our objectives in relation to being a sustainable business. Despite the announcement in 2006 of the outsourcing of most of the production, the employees delivered a great and impressive effort, even though the pressure on the employees has without doubt been very heavy. Furthermore, due to the unexpectedly great demand, we have not been able to meet the retailers’ needs in a completely satisfactory way. In the coming years, we will increase our focus on meeting our objectives in relation to all our stakeholders. This is also the reason why we expect considerably lower results in 2007. However, our long-term goal is still an operating margin (ROS) of 13.5%”, says Mr Knudstorp.
For further information, please contact:
Head of Corporate Communications
Tel.: +45 79 50 65 79
Mobile: +45 20 30 81 35
The LEGO Group is a privately held, family-owned company, based in Billund, Denmark. It was founded in 1932 and today the group is one of the world's leading manufacturers of play materials for children, employing approximately 4,500 people globally. The LEGO Group is committed to the development of children's creative and imaginative abilities. LEGO products can be purchased in more than 130 countries.
LEGO and the LEGO logo are trademarks of The LEGO Group.