Profits fall like a ton of bricks as Lego looks to ‘stabilise’

L First fall in profits and sales since 2004 l Chief executive says signs of recovery spotted

Lego, the Danish toymaking giant, has posted its first fall in annual earnings and sales since 2004 after seeing profits tumble 18 per cent in what it yesterday branded a “challenging” past year.

The group admitted that it was disappointed in its performance as it reported pretax profits of 10.2 billion Danish krone (£1.2bn) against Kr12.4bn in the previous 12 months.

And it came as Lego chiefs admitted there was “no quick fix” for the trading headwinds it was facing in many countries, typified by consumer caution.

The launch of the Lego Ninjago movie and strong demand for Lego Star Wars products also failed to halt the slide in sales, down 8 per cent to 35bn Danish krone (£4.2bn).

Operating profits declined 17 per cent to Kr10.4b. It marked the first fall in both sales and profits since the group’s woes in 2003-4, four years before the financial crash and following western European recession.

But the plastic brick giant said it was focusing on “stabilising” the business in 2018 and had started to see some early signs of recovery at the end of last year.

Niels Christiansen, Lego group chief executive, 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.”

Christiansen added: “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”.

But he stressed there was “no quick-fix”. Lego has been slashing the costbase of the business and overhauling operations in a bid to boost flagging sales, announcing 1,400 job losses last autumn. That equated to 8 per cent of the total headcount.

The group, whose products are a staple of many nurseries and which employs about 900 in the UK, said these “difficult actions” in reducing overheads were now complete.

The giant has previously said the group needed a “reset”, having become increasingly complex over the past five years, making it harder for Lego to expand and triggering the chief executive’s overhaul.

Despite falling annual sales, the overhaul started to bear fruit in the final months of 2017, the company added.

Overall consumer sales were flat in the year, but rose in seven of its 12 largest markets in December. Women’s Enterprise Scotland (Wes) is calling for concerted action to end the gender gap in enterprise, in advance of International Women’s Day tomorrow, and is requesting that the Scottish Government and business support agencies acknowledge female-led firms as a growth sector in the Scottish economy. Justine Mitchell, pictured, Wes ambassador and founder of beauty salon and spa Chamomile Sanctuary, said: “Good support is fundamental for business growth.”