Lagkagehuset A/S

The summary of 2022 is that it has been another year impacted by macro-economic upheavals. The COVID-19 pandemic impacting the start of the year with the Omicron variant, although the effect of this was relatively short lived and we started to see further normalisation in customer behaviour and continued return to the office. Unfortunately, just as we started to see the clear benefit of this normalisation Russia invaded Ukraine in late February and sparked the largest conflict seen in Europe in a generation. The war accelerated and exacerbated the post COVID and Brexit impact on the cost and supply of key raw materials particularly for a multinational artisan baker, flour, grain, sunflower products and eggs to name a few – within just weeks the price of flour increased by more than forty percent. Further to this energy prices soared as Russian energy was excluded from the market, raw material costs, distribution and in particular energy continued to increase throughout the year.
From a commercial point of view the general weakening in consumer confidence with these cost increases was of such materiality that despite trying to offset some of these via thoughtful and strategic revenue management including some price increases and a continued and unrelenting focus on operational delivery which has also produced excellent results there has been an impact on profits in 2022.
The transformation program entitled SCALE continued as planned to the end of 2022 and was finalised end year, with great achievements in creating tools and digital solutions to make the business from bakery to sales more structured and foreseeable. Reducing waste, planning better to create the foundation for our employees to succeed and eventually make better products and provide better service to our customers.
Our commitment to our purpose to create “a better bakery for all” has driven all thinking, planning and results again this year. All our stakeholders have seen the improvements delivered over the year, for our teams we have continued to invest in communication and engagement tools ensuring that all the more than 2,700 people that work in the business have real time feedback and communication tools to stay informed about the business and to feedback what is working and not working for them in being part of the Lagkagehuset team.
For our customers, we have invested in coming to new communities, as well as our regular activity in new product development. We continue to enhance and add functionality to our App with more than half a million people in 2022 regularly engaging with us on news, offers, click & collect, delivery plus given us real time feedback on our offering via net promoter score measurement. Enabling thousands of customers a month to tell us all about their last visit to us. In 2022 features as gift cards and extended delivery to 14 cities across Denmark were added to the App. The Lagkagehuset App won several awards at Danish Digital Awards in 2022 and the continued journey with our loyalty members continues into 2023.
We began 2022 with a business that was in great health having delivered a result well in excess of our plan and we were well placed to capitalise on the growth opportunities presented. Despite the significant macro-economic challenges of 2022, we continued to invest in the long-term growth and capacity of the business. Lagkagehuset opened 4 new stores and closed 1 store, now having 109 stores.
Current plans for openings for 2023 will depend on the development of the inflation and private economy but current pipeline supports a similar level of expansion in the coming years.
Results for the year did not meet the expectations and considered unsatisfactory in a general sense but driven by the turmoil of the economical market situation with costs rising to unprecedented levels and consumers private budgets being strained.
The strategy plan developed in 2020 and revisited in late 2021 for 2022 has been pursued and executed to the letter, transforming in our Danish market, starting with the store operating model, improving the customer experience whilst freeing up time for the teams to spend more time with our customers, this has is evident in our customer Net Promoter Score (NPS) ending the year at a record high 60%. Centralising our ordering systems has enabled transparency and controls for product availability and minimum waste from our completely vertically integrated business.
Building upon our artisanal skill and heritage in baking and confectionary we continued to bring truly excellent products to our customers, and finally further expanding our digital footprint and loyalty customer program has brought even more value and improved services to our customers.
The Company revenue for the period 1 January – 31 December 2022 amounted to DKK 1,011 million (2021: DKK 905 million), while loss for the period amounted to DKK -144 million (2021: DKK -82 million). The balance sheet showed an equity of DKK 291 million at 31 December 2022 (2021: DKK 236 million). Gross profit for the period amounted to DKK 408 million (2021: DKK 409 million), and EBITDA for the period amounted to DKK -69 million (2021: DKK 0 million).
In December 2022, the credit facility was renewed by Lenders and extended. Our owners also remain confident in the management and the long-term growth and success of the business. In December 2022 they injected DKK 200 million to support the continued expansion across markets and in particularly in London and New York.
Management is confident of current cash holdings and profit controls, and the forecast is secured for the continued expansion strategy of the company balanced to how the market situation evolves in 2023. Expectations are modest organic growth and cost continuing downwards to levels post war by end of the year.
There is an overall credit facility of DKK 550 million at 31 December 2022. Covenant requirements for the credit facility have been reported on an ongoing basis, and all conditions have been met.
Non-financial matters
In Denmark, the bakery segment in 2022 was still characterized by a consumer wanting freshly and premium baked products rather than packaged products, which leads to higher growth rates within premium baked products and in particular cake. Café sales and coffee growing as lockdowns and restrictions was lifted through the year.
Both in Denmark and internationally, there are consumer trends within food moving towards on-the-go solutions, which creates growth opportunities within food and coffee offerings. With the loyalty program and our App solution supporting easy use, in store, click and collect, or grab and go is a growth driver looking forward.

Special risks
Due to its operations, investments and financing, the Company is exposed to changes in interest rates. The parent Company manages the Company’s financial risks and liquidity, including capital sourcing and investment of surplus liquidity, centrally. Under the Company’s financial policy, the risk profile is kept low to ensure that interest rate and credit risks arise only because of commercial circumstances.