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Ubisoft 2009 Financial Report Positive, Narrows down Dates

by Rainier on May 27, 2009 @ 11:47 a.m. PDT

Ubisoft released its results for the fiscal year 2009, revealing sales were up 14.0%. In a year where most of its competitors closed studios and had layoffs, Ubisoft has acquired 5 studios and hired 1,300 new employees, and plans to focus more on quality. During the conf. call CEO Yves Guillemot confirmed that Assassin's Creed 2, Splinter Cell: Conviction; Red Steel 2, and Rabbids Go Home are due Q4 (Nov. - Dec. 2009) while RUSE, I Am Alive and the new Ghost Recon title between Jan. - March 2010.

Yves Guillemot, Chief Executive Officer, stated: "Ubisoft ended fiscal 2008-09 with full year sales growth of 18.4% at constant exchange rates, the second best profitability among comparable companies in its industry, and a 5.1% rise in net income excluding non-recurring items and before stock-based compensation. This performance illustrates Ubisoft’s unique business model with cost-competitive development studios and some of the most talented developers in the industry. It enables the Group to be at the leading edge of innovation and offer superior quality games, while maintaining a high level of profitability."

Sales for full-year 2008-09 came to €1,057.9 million, up 14.0%, or 18.4% at constant exchange rates.

As mentioned in earlier announcements, the stronger contribution from both casual games (31.9% of sales versus 25.4% in 2007-08) and the distribution business (7.6% of sales compared with 2.8% in 2007-08) has had a significant impact on the income statement structure. Casual games generate lower gross margins, require less R&D expenditure and have higher marketing costs. The distribution business has low gross margins but requires no R&D expenditure and only limited marketing costs.

Gross profit represented a lower percentage of sales, coming in at 60.5% (€639.5 million) against 66.0% (€612.7 million) in 2007-08. This decrease is attributable partly to the above mentioned product mix and partly to price pressure (notably on Nintendo DS games) experienced during the second half of the year.

Current operating income before stock-based compensation totaled €128.7 million (12.2% of sales), in line with the revised target of around 12.0% announced in the fourth-quarter sales release. This figure is down on the €133.1 million recorded for 2007- 08 (14.3% of sales) when there was a high contribution from Assassin's Creed®, Tom Clancy's Rainbow Six® Vegas 2 games, and the casual range.

The current operating income figure reflects the following combined factors:

  • A €26.8 million rise in gross profit.
  • A €18.3 million reduction in R&D expenses due to the product mix effect. These expenses represented 23.3% of sales (€246.3 million), down from 28.5% (€264.6 million) in 2007-08.
  • A €49.4 million increase in SG&A expenses to 25.0% of sales (€264.4 million), compared with 23.2% (€215.0 million) in 2007-08.
    • Variable marketing expenses increased significantly to 14.5% of sales (€153.3 million), from 12.3% (€114.1 million).
    • Structure costs decreased, as a percentage of sales, to 10.5% (€111.1 million) from 10.8% (€100.9 million) in 2007-08.

Ubisoft ended fiscal 2008-09 with operating income of €113.5 million, versus €131.5 million the previous year. This figure includes stock-based compensation of €16.9 million (€8.5 million in 2007-08) and €1.6 million in non-recurring gains (€6.9 million in 2007-08). Net financial expenses came to €4.8 million (compared with net financial income of €27.0 million in 2007-08) and mainly break down as follows:

  • €0.3 million in financial income compared with €1.9 million in financial charges in 2007-08.
  • €5.3 million in foreign exchange losses versus €13.7 million in 2007-08.
  • An €8.8 million positive impact arising from Calyon’s sale of the remaining Ubisoft shares it held through the Equity Swap. Net financial income for 2007-08 included a €28.0 million positive impact from the Equity Swap.
  • €8.7 million in charges for impairment of Gameloft shares, which have been written down to €1.64 in the balance sheet from €2.73 previously. As a reminder, in 2007-08, Ubisoft recorded a gain of €14.8 million following Calyon's sale of a portion of its Gameloft shares.

Net income for 2008-09 totaled €68.8 million compared with €109.8 million in 2007-08. Diluted earnings per share3 amounted to €0.71 versus €1.14.

Excluding non-recurring items (i.e. Gameloft, Equity Swap, lawsuit and other factors) and before stock-based compensation, the net income figure would amount to €84.7 million and diluted earnings per share3 would represent €0.87, compared with net income of €80.6 million for 2007-08 and €0.84 per share.

Cash flows from operating activities came to €27.8 million in 2008-09 compared with €116.8 million the previous year, reflecting cash flows from operations* of €38.1 million (versus €58.7 million in 2007-08) and an €10.3 million increase in working capital requirement (against a €58.1 million decrease in 2007-08).

At March 31, 2009, Ubisoft had a net cash position of €154.2 million compared with €149.5 million at March 31, 2008. The year-on-year change reflects the following main movements in 2008-09:

  • The above-mentioned €27.8 million in cash flows from operating activities.
  • €26.9 million in purchases of tangible and intangible assets.
  • Business acquisitions totaling €10.3 million.
  • Proceeds from the issue of capital amounting to €12.4 million following employee rights issues and the exercise of stock options.
  • A €1.7 million effect from exchange rate fluctuations.

Ubisoft is confirming its previously announced targets for 2009-10, namely:

  • First-quarter sales of around €95 million.
  • Full-year sales of approximately €1,100 million and current operating income before stock-based compensation representing at least 11% of sales.

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