Danish toymaker Lego is planning to cut 1,400 jobs by the end of the year in order to overhaul its business operations following declining sales and revenue.

In its financial results for the first half of this year, Lego indicated a drop of 5% in revenue to kr14.9 ($2.38bn), while its operating profits fell by 6% to kr4.4bn ($705.19m).

The company reported net profits of kr3.4bn ($547m), which is a decrease of 3% compared with kr3.5bn ($563m), while cashflow from operating activities was kr4.6bn ($740m) compared with kr3.9bn ($628m).

"We are confident that we have the long-term potential of reaching more children in our well-established markets in Europe and the US.”

The financial underperformance is said to be the company’s first decline in revenue in more than a decade.

Lego executive chairman Jorgen Vig Knudstorp said: “We are working closely with our partners and we are confident that we have the long-term potential of reaching more children in our well-established markets in Europe and the US.”

The company noted that its organisational structure has become complex to support global double-digit growth over the past five years, and subsequently needs to undergo changes.

Knudstorp added: “This means we will build a smaller and less complex organisation than we have today, which will simplify our business model in order to reach more children.

“It will also impact our costs. Finally, in some markets, the reset entails addressing a clean-up of inventories across the entire value chain. The work is well under way.”

The proposed job cuts represent around 8% of the company’s total workforce of 18,200.