The FINANCIAL -- The LEGO Group on March 6 released its full year financial results for 2017, reporting a decline in revenue and operating profit.
Revenue for the full year decreased by 8 percent to DKK 35.0 billion compared with DKK 37.9 billion in 2016. Excluding the impact of foreign currency exchange, revenue for the full year declined 7 percent compared with 2016.
Operating profit (profit before financial items and tax) for 2017 was DKK 10.4 billion compared with DKK 12.4 billion for 2016, a decrease of 17 percent year on year.
Net profit for the full year was DKK 7.8 billion compared with DKK 9.4 billion in 2016.
Cash flow from operating activities for the year was DKK 10.7 billion compared with DKK 9.1 billion in 2016.
Decline in revenue was driven in part by clean-up of inventories across the value chain. Global consumer sales were flat and trended upwards in the final months of 2017, according to LEGO.
Niels B. Christiansen, the LEGO Group CEO said: “2017 was a challenging year and overall we are not satisfied with the financial results. However, we ended the year in a better position. In December, consumer sales grew in seven of our 12 largest markets and we entered 2018 with healthier inventories. In 2018, we will stabilise the business and invest to build sustainable growth in the longer-term.
“During 2017, revenue in our established markets declined, primarily due to actions we took to clean up inventories. This decline impacted our operating profits. We also simplified and reduced the size of the organisation to meet current business requirements and these difficult actions are now complete. Our balance sheet, cash flow and profitability, remain sound.
“We started 2018 in better shape and during the coming year we will stabilise the business by continuing to invest in great products, effective global marketing and improved execution. There is no quick-fix and it will take some time to achieve longer-term growth.”
While revenue in established markets in North America and Europe declined in 2017, total consumer sales across a number of these markets improved, particularly in the final months of the year. The LEGO Group sees opportunities to return to growth in these regions and will work closely with retail partners to bring LEGO play experiences to more children.
The Group also sees strong potential in China, where revenue grew high double-digits in 2017. It recently signed a partnership agreement with one of the country’s largest internet companies, Tencent, and has plans to further expand its presence in this strategic market. The company also will open an office in Dubai towards the end of 2018 to support efforts to expand operations in the Middle East and Africa.
Across the LEGO portfolio, performance of classic LEGO ranges was satisfactory and LEGO City, LEGO DUPLO, LEGO Creator and LEGO Friends continued to perform well, demonstrating the timeless appeal of LEGO play. LEGO NINJAGO also benefited from the release of the movie in September. LEGO Star WarsTM products, released in the second half of 2017, performed in line with expectations.
‘Planet Promise’: our commitment to children, communities and the environment
During 2017, the LEGO Group continued efforts to achieve its ambition to bring LEGO play to more children around the world, and deliver on its ‘Planet Promise’ to have a positive impact on the planet and communities of which it is a part.
Christiansen said: “We remain committed to our mission to inspire and develop the builders of tomorrow, and our ambition to reach more children with LEGO experiences is more important than ever. Being purpose-driven is important to children and parents who enjoy our products and to our colleagues around the world. We will continue to invest in activities that positively impact the lives of children, our local communities and the environment.”
The LEGO Group continued to partner with UNICEF to promote the benefits of play in children’s development. It supported UNICEF’s World Children’s Day efforts in November 2017, which aimed to give a voice to children around the world.
In May 2017, the company achieved its ambition to balance 100% of its energy consumption with energy from renewable sources, three years ahead of target, and the first toy company to do so. In 2018, the company will continue its partnership with WWF and aim to reduce CO2 emissions across its supply chain. It will also continue working towards its ambition to use 100% sustainable materials by 2030. In March, the Group announced the launch of its first elements made from plant-based materials. Botanical elements, such as leaves and trees, made from plant-based plastic sourced from sugarcane will be introduced to sets during 2018.
Summary text for LEGO.com post:
The LEGO Group reported a decline in revenue and operating profit for 2017, but ended the year in a better position. Global consumer sales for 2017 were flat. In 2018, the Group will stabilise the business and invest to create a platform for sustainable longer-term growth.