LEGO Group reports improved interim result

LEGO - August 2006

The LEGO Group recorded a result before tax of DKK 238 million (appprox. 32 million Euro) for the first six months of 2006. This was DKK 440m (appprox. 59m Euro) better than for the same period of 2005. The principal reason for the improvement is that sales for the first six months were 19% up on the same period last year. At the same time, the company continues to focus on reducing its costs and improving its productivity. The Group’s mid term result has improved significantly. This was achieved through higher sales combined with greater productivity and a continued tight rein on costs.

Group sales rose from DKK 2,364m (appprox. 317m Euro) for the first half of 2005 to DKK 2,821m (appprox. 378m Euro) for the first half of 2006. This improved position is due partly to the fact that retail inventories at the start of the year were very low, following strong Christmas sales. Restocking retailers’ shelves imposed great pressure on the Group’s supply capability. Classic play themes such as LEGO City and DUPLO Pre School products have been in great demand. It was a further contributory factor that licensed products were in much greater demand than is usually the case during years with no movie launches. The action packed BIONICLE and EXO FORCE lines have also been in high demand.

Geographically, sales were better than expected in the Nordic countries, Benelux and Japan – while in other major markets such as the USA, Germany, Britain and France they were level with expectations. As expected at the beginning of the year, the global toy market has seen a decline during the first six months of 2006.

Although it was expected at the beginning of the year that sales in 2006 would decline slightly, the LEGO Group now estimates – in the light of its performance during the first six months – that total sales for the full year will match those of 2005, i.e. approx. DKK 7 billion (appprox. 938m Euro). Turnover during the second half of 2006 is expected to be lower than in the second half of 2005, which was characterised by substantial sales of licensed products.

CEO Jørgen Vig Knudstorp says: “With the fine results achieved during the first half of this year, we believe we can realistically accomplish the estimated higher result for the year as a whole. Obviously, the sales improvement realized during the first six months is a positive development, but it is important for me to emphasise that we continue to put profitability before growth. Therefore, we shall continue to pursue the initiatives we launched in 2004 with the objective of improving our profitability. These include continued focus on the classic LEGO products and on the outsourcing of the greater part of our production over the coming three years.”