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LEGO Group Announces Growth in 2007

LEGO Group Momentum Builds: 2007 Delivers Global Growth to World's Leading Construction Toy Maker

- Company's U.S. sales grew double digit, propelling U.S. toy market and construction category shares to highest level in years

NEW YORK, Feb. 19, 2007 -- AMERICAN INTERNATIONAL TOY FAIR -- The LEGO Group today announced it achieved growth in 2007 across all of its key markets, attributable to a renewed strategic focus on balancing its core business and products with some of the strongest global licenses among children.

Global performance

The company's year-end result is considerably better than anticipated at the beginning of 2007, when both decreasing sales and decreasing revenue were predicted, as increasing investment activities and extensive supply chain outsourcing were expected to put heavy pressure on the Group's performance. However, the Group succeeded in producing at a level that matched much of the strong year-long demand in its markets.

  • Profit for the year before tax reached $279 million USD against $253 million USD in 2006.
  • Net profit for the year amounted to $203 USD million against $255 USD million in 2006, which gives a return on equity of 71.6%.
  • The Group's equity increased from $235 million USD at the end of 2006 to $331 million USD at the end of 2007.
  • Revenue amounted to $1.584 billion USD against $1.539 billion USD in 2006, an increase of +2.9%. Adjusted for exchange rate movements in 2007, the increase would have been approximately +6%.
  • Profit before special items, financial income and expenses and tax amounted to $290 million USD in 2007 against $277 million USD in 2006.
  • The operating margin (ROS) was 18.1% against 17.0% in 2006.
Note: conversion from DKK to USD uses the year-end exchange rate.

"In the light of our expectations for 2007, I consider the results very satisfactory," said Jorgen Vig Knudstorp, CEO, LEGO Group. "It has particularly been very satisfactory for us that we have been able to meet most of the demand for LEGO products despite our extensive supply chain relocation activities. This has only been possible through the impressive effort made by our employees."

U.S. highlights

In the U.S., the company achieved its third consecutive year of consumer sales growth, again outpacing the U.S. toy industry. An +11.5% gain in consumer sales(1) over 2006 further bolstered the brand's #1 rank in construction toys, with category share increasing +6 points from 60% to 66%, the highest level in five years, according to The NPD Group.

A strong product portfolio balanced between homegrown classics and licensed lines drove U.S. sales of LEGO® products in 2007 to be four times larger than the next construction toy brand(2). The company successfully renewed its position of strength in non-licensed play theme products, evidenced by the simultaneous successful launches of three new themes in 2007 -- LEGO Aqua Raiders, LEGO Castle and LEGO Mars Mission -- each individually delivering results on par with some of the strongest classic play themes in LEGO history.

In a year of heightened competition from video games and consumer electronics, classic LEGO building sets fared extremely well, with the LEGO Brand ranking as #1 "most fun" among boys 6-8(3).

Among product line highlights:

  • LEGO CITY, the classic "downtown" theme and recruitment platform for builders ages 5 and older received the prestigious Toy of the Year Award for Best Activity Toy; meanwhile sales for the line have tripled since 2004, with 2007 U.S. line sales growing +45% over 2006.
  • Sales of LEGO Creator, a line of classic build and re-build models were also up double-digit versus 2006.
  • Collectible, authentic models, supported by another blockbuster video game release, drove LEGO Star Wars™ sales to the top of the company's U.S. chart in a non-movie year.
  • Constructible BIONICLE® action figures maintained strength in their seventh year as the company's second strongest U.S. line.
  • LEGO Racers took pole position as the third strongest line in the U.S.

"We have successfully realigned our business strategy to balance our portfolio between core, classic LEGO play, homegrown stories and themes, and the best licenses in the industry to drive the strongest LEGO momentum we have seen in the U.S. in years," said Soren Torp Laursen, president, LEGO Systems, Inc., the company's North American division. "This accomplishment is perfectly timed to coincide with the 50th anniversary of the original LEGO brick in 2008. Our legacy of innovation to inspire and develop the builders of tomorrow through the highest quality, safest play experiences, combined with our continuing strength among American consumers, will lead us to growth in 2008."

Expectations for 2008

The global toy market is subject to great uncertainty in 2008. The trends of stagnation and recession seen in the U.S. during the last six months of 2007 and into 2008 may create pressure on the Group's performance. Historically, the LEGO Brand has weathered U.S. economic recessions very well, and leveraging the Brand's 2007 momentum, which continues year-to-date 2008, the company expects to achieve global sales growth of 3-5%, the first time it has planned for growth in the last three years.

"In spite of the uncertainty of the U.S. economy and the increased competition facing the toy industry, we feel we are in a prime position to leverage the tremendous momentum we built in 2007, which is continuing year to date 2008, to achieve aggressive U.S. consumer sales growth to support our global growth plan," continued Laursen. "Our history of premium quality and commitment to safety, and our supply chain operations based in Eastern Europe and Mexico, are helping to ensure that many of the issues currently facing toy manufacturers are not as much of an impact for us."

About LEGO Systems

LEGO Systems, Inc. is the North American division of The LEGO Group, a privately-held, family-owned company based in Billund, Denmark, one of the world's leading manufacturers of creatively educational play materials for children. The company is committed to the development of children's creative and imaginative abilities, and its employees are guided by the motto adopted in the 1930s by founder Ole Kirk Christiansen: "Only the best is good enough." Visit the virtual LEGO world at http://www.LEGO.com.

LEGO and BIONICLE are trademarks of the LEGO Group. © 2008 The LEGO Group.

© 2008 Lucasfilm Ltd. & TM. All rights reserved. Used under authorization.

1 Source: The NPD Group / Consumer Tracking Service
2 Source: The NPD Group / Consumer Data
3 KidQ 2007

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