Lego System A/S

Ledelsesberetning
Management's ReviewFinancial review The financial year 2023 was a year on level with 2022 for the LEGO Group and LEGO System A/S. For LEGO System A/S revenue for the full year decreased one percent to DKK 47,957 million.Net profit was DKK 10,912 million in 2023 against DKK 11,370 million in 2022.Revenue decreased slightly, and is below 2023 plans, which anticipated single digit growth. Revenue decreased despite resilient supply chain, expansion of sales channels and strong consumer demand for its portfolio. Excluding the impact of currency, revenue increased one percent compared to 2022.Net profit is below 2023 expectations, which anticipated a result on level, but satisfactory, as it was im- pacted by accelerated but balanced strategic initiatives, designed to deliver current and long-term sus- tainable growth. This included areas such as brand awareness, product innovation, retail platforms, dig- italisation, and sustainability.Management considers the Company's financial performance in the year satisfactory.OutlookIn 2024, the Company expects single digit revenue growth through developing an appealing portfolio to builders of all ages and improving brand and shopping experiences.Net profit is expected to decline single digit due to continuous strategic initiatives such as retail plat- forms, digitalisation and sustainability to ensure short and long-term growth.Special risks - operational and financial risks Group management is responsible for the ongoing risk management, including mapping and assess- ment of risks as well as risk-minimising measures.Risk management operates in four areas: strategic, financial, operational and disaster risks.The work with risks continues to follow the policies and strategies adopted by the board for the areas. For these areas, systematic identification, assessment and coverage/handling are carried out in accord- ance with the strategies. A comprehensive overview of all the company's significant risks has been es- tablished in a consolidated risk matrix, where the effect and probability of an episode are mapped and prioritised, just as the consolidated risk exposure is measured and reported.LEGO System A/S's most significant risks relate to the significant uncertainties in the toy market with significant volatility around the launch of new product concepts.The overall risk exposure is still assessed as moderate in relation to the adopted risk appetite.Currency risks Currency risks are managed centrally on the basis of the LEGO Group's board approved currency pol- icy. Future contracts and options are used to hedge purchases and sales in foreign currencies. As a gen- eral rule, these are classified as hedges and meet the accounting requirements for securing future cash flows.Interest rate risksThe interest rate risk relates to interest-bearing liabilities and receivables. The interest rate risk is con- sidered to be insignificant and is not expected to affect the result significantly.Credit risksCredit risks relate to receivables from sales and services. The LEGO Group has fixed credit granting pro- cedures. The Company has no significant receivables from sales and services concentrated in specific countries. As a result, the total credit risk is assessed to be low.Disaster risks Disaster risks cover situations that can paralyse the Company's operations. The LEGO Group has conti- nuity plans that ensure production; there is also an extensive insurance program that supports in the event of disasters. The Group has a crisis management group that can come together so that a possible disaster can be handled in the best possible way.Research and development (R&D)Continuous innovation and development are key to the LEGO Group's aspiration to inspire the builders of tomorrow. In 2023, new products account for 47 percent of the portfolio. The LEGO Group invests in innovating core play themes, exploring new play patterns as well as understanding the intersection be- tween digital and physical play and creating new products to meet these changing needs. R&D activi- ties include developing new technologies to enable learning through play; trend spotting; anthropolog- ical studies; and collaborating with educational institutions to deepen the company's understanding of children's development.Branches The Company has a smaller branch abroad, LEGO System A/S Latvijas filiāle "Baltic", domiciled in Riga, Latvia.Talent Attraction and RecruitmentWe continuously review our HR system, processes, and ways of working to identify opportunities to improve proactively. Most recent adjustments include:•Tools and training to ensure the language in job ads is inclusive and addresses both genders.•Improvements to employer branding and talent attraction strategies to ensure relevance andappeal to the under-represented gender and communities.•Work with Employee Advocacy Groups and external partner organisations to increase the visi- bility of jobs at the LEGO Group to the under-represented gender and communities.•Enabling a balanced candidate slate by active sourcing and D&I check points throughout therecruitment process.•Secure diverse and gender-balanced interview panels.•Provide training on recruiting for diversity for recruiters, screeners and hiring managers.•Interview and asses through global standardized interview and assessment guide, to increaseinclusivity and reduce biases in the selection phase.Leadership, Learning & Development We invest in everyone and make lifelong learning and career development solutions available to all:•The Leadership Playground is our leadership model, which emphasises the importance of inclu- sion. We each play a part in creating a safe space for everyone to be seen, heard, valued, andrespected. Leadership is the act of energising everybody every day and a responsibility we allshare as employees of the LEGO Group.•We strive to build inclusive behaviours in all employees through training and communication.We offer a Conscious Inclusion training program for all employees designed to create aware-ness of biases, the inclusive behaviours that counteract bias and how employees can embodyinclusiveness in daily work. We tailor training to address the needs and responsibilities of peo-ple leaders, recruiters, HR business partners and employees.•Ensure broad access to learning and development programs and solutions, secure gender bal- ance in executive leadership training programs and focus on gender balance in succession plan-ning for all senior leadership roles.Reward, Performance Management & Promotions Fair and equitable processes underpin progress on gender balance and representation at all levels:•Track and analyse pay equity annually in Performance Management pay-out and salary for gen- der differences and proactively implement adjustments for either gender if variation exceeds5% and cannot be explained by differences in performance or experience.•Guide people leaders conducting annual people review and performance management conver- sations to ensure a fair and equitable process for all.•Implemented strict conditions to limit internal flows and ensure that 95% of all new roles areadvertised at least internally.•Tracking promotions and transitions into people leader roles on gender split to monitor for po- tential gender imbalances.Intellectual capital resourcesThe average number of employees in 2023 was 5,587 compared to 4,958 in 2022. Employees partici- pate in the LEGO Group's Performance Management Programme. The programme is designed to ensure all colleagues work towards achieving the LEGO Group's short and long-term ambitions. Employees have targets that are aligned to the Group's overall targets and are awarded a bonus based on perfor- mance versus target.HR Data & Measures •Gender Diversity metrics have been incorporated into the standard HR reporting across theLEGO Group to allow for detailed follow up within each part of the company to create transpar- ency on potential challenged areas. HR business partners regularly review the progress withtheir leadership teams on recruitment and promotions.•To accelerate change and learning in the organisation, Global Employee Advocacy Groups(EAGs) have been established on topics including Accessibility, Asian, LGBTQ+, People of Col-our, Women and Intergenerational inclusion. Each EAG has an assigned Executive LeadershipTeam (ELT) sponsor and are autonomous, employee-driven groups designed to scale employeeimpact on the D&I agenda, remove barriers to inclusion and belonging for all, and accelerateprogress on our global priorities and ambition on D&I.