Yves Guillemot, Chief Executive Officer of Ubisoft stated "The sharp improvement in our operating profitability in fiscal 2006-07 reflects the diversity and strong performance of our games portfolio as well as tight control over SG&A fixed costs and marketing expenses. Thanks to our solid results and the effective containment of working capital requirements during the year, we were able to generate ?53 million ($71.45) in cash flows from operating activities while at the same time continuing to implement our growth strategy, with R&D investments up 22%. With the best games line-up in its history, Ubisoft has laid the foundation for starting 2007-2008 in excellent conditions and is well-positioned to continue to gain market share and further increase its profitability in a high-growth sector."

Main income statement items:

Gross profit up ?92 million ($124.03) (66.5% of sales):

• Sales for full-year 2006-07 came to ?680.3 million ($917.14), up 24.4%, or 27.2% at constant exchange rates.
• Gross profit advanced ?91.7 million ($123.62) to ?452.4 million ($609.90), representing 66.5% of sales, versus 65.9% in 2005-2006. This rise was fueled by sales of new generation games (74% gross margin), which accounted for 60% of the total sales figure. The contribution of these games offset the expected decreasing margins of old generation games (56% margin), as well as the impact from growing distribution activities and back-catalog sales, which traditionally generate lower margins.
• SG&A expenses down ?6.1 million ($8.22) (26.6% of sales), R&D expenses up 62,6 M? (34.2% of sales):
• Current operating income before stock options surged to ?38.3 million ($51.63) from ?3.1 million ($4.18) in 2005-2006, representing 5.6% of sales versus 0.6%. This increase was primarily attributable to a combination of the following factors:
• ? The ?91.7 million ($123.62) rise in gross profit. ? A decrease in SG&A expenses to ?181.1 million ($244.15) (26.6% of sales) from ?187.2 million ($252.37) the previous year (34.2% of sales), achieved due to a reduction in marketing expenditure and logistic costs to ?87.3 million ($117.69) from ?95.5 ($128.75) million, as well as tight control over fixed costs which only edged up to ?93.8 million ($126.45) from ?91.7 million ($123.62) the previous year.
• Partially offset by the expected increase in R&D expenses to ?233.0 million ($314.12) (34.2% of sales) from ?170.4 million ($229.72) (31.1% of sales) in 2005-06.

Net financial income of ?18.0 million ($24.27), due to a ?27.1 ($36.53) million gain arising from the Equity Swap :

Net financial income came to ?18.0 million ($24.27) (compared with a net financial charge of ?9.1 million ($12.27) reported in 2005-06), breaking down as follows:

• ?7.0 million ($9.44) in financial charges (?10.3 million ($13.89) in 2005-06), including ?1 million ($1.35) related to compound financial instruments, recorded in accordance with IFRS. This reduction reflects the year-on-year decrease in the Group's debt.
• ?1.7 million ($2.29) in foreign exchange losses (?6.3 million ($8.49) in 2005-06).
• A ?27.1 million ($36.53) positive impact attributable to the Equity Swap (?7.5 million ($10.11) in 2005-06).

The contribution of equity accounted companies (Gameloft) amounted to ?3.1 million ($4.18), compared with ?19.1 million ($25.75) in 2005-2006.

Diluted earnings per share: ?0.91 ($1.23):

Ubisoft ended the fiscal year with net income of ?40.5 million ($54.60), versus ?11.9 million ($16.06) one year earlier. Diluted earnings per share amounted to ?0.91 ($1.23).

Main cash flow statement and balance sheet items:

Cash flows from operating activities jumped from a negative ?32.3 million ($43.54) in 2005-2006 to a positive ?53.2 million ($71.72) in 2006-2007, reflecting the impact of the robust increase in operating income, coupled with the ?7.4 million ($9.98) decrease of working capital requirement.

On March 31, 2007, Ubisoft had a net cash position of ?55.0 million ($74.15) compared with a net debt position of ?65.3 million ($88.03) at March 31, 2006. This ?120.3 million ($162.18) improvement was driven by the rise in cash flows from operating activities as well as:

• Capital increases totaling $144.52 million.
• $3.91 million in translation adjustments.
• Investments of $57.97 million, including $33.70 million for the acquisition of the Far Cry and Driver brands.

In 2007-08, Ubisoft will have the best line-up in its history with the new titles launched for seven of its successful franchises (including Brothers in Arms, Tom Clancy's Splinter Cell and Rayman), 6 new brands (including Assassin's Creed, Tom Clancy's EndWar and Haze) and 4 licensed games (Surf's Up, Lost, Naruto, Beowulf). Ubisoft also expects to see a considerable ramp-up of games for the Wii and Nintendo DS systems thanks to a highly pro-active strategy in the casual gaming segment.

As a result, Ubisoft is maintaining its previously announced targets:

• First-quarter sales of approximately $161.78 million.
• Full-year 2007-2008 sales of around $1,078.51 billion and current operating income before stock options representing at least 8% of total sales.