Ubisoft reports full-year 2007-08 results

(PresseBox) (Paris, ) .
- Sales up 36% (43% at constant exchange rates).
- Record-high profitability and net cash position:
-- Current operating income : 14.3% of sales.
-- Cash flow from operating activities: €117 million.
-- Net cash: €150 million.
- Outlook for 2008-09 confirmed.
- Events subsequent to March 31, 2008:
-- Calyon sells remaining Ubisoft shares held under the Equity Swap.
-- Signature of a new syndicated loan agreement.

Today Ubisoft released its results for the fiscal year ended March 31, 2008.


Yves Guillemot, chief executive officer at Ubisoft stated: "The surge in our profitability and net cash in 2007-08 was driven by continued strengthening of existing franchises such as Rainbow Six, Rayman, The Settlers and Ghost Recon, combined with the sharp ramp-up of the "Games For Everyone" casual range and the successful launch of the new releases, Assassin's Creed and Imagine. Going forward, 2008-09 is set to be another record year for Ubisoft. We now have 14 multimillion unit-selling franchises and will be launching 5 new IPs during the period as well as new brands in the casual games segment."


Main income statement items

Sales for full-year 2007-08 came to €928.3 million, up 36.4%, or 42.9% at constant exchange rates.

Gross profit represented 66.4% of sales, versus 64.6% in 2006-07. This rise was fueled by a more favorable product mix thanks to the Group's early position in games for new generation consoles.

Current operating income before stock options jumped to €133.1 million from €38.3 million, representing 14.3% of sales versus 5.6% in 2006-07, and outstripping the 14.0% forecast. This increase was primarily attributable to a combination of the following factors:
- The rise in gross profit.
- The strong decrease in R&D expenses as a percentage of sales, due to the superior sales performance turned in during the year. These expenses totaled 28.5% of sales (€264.6 million), compared with 34.2% in 2006-07 (€233.0 million).
- The significant leverage effect on structure fixed costs, which decreased as a percentage of sales. In 2007-08 these costs amounted to 11.3% of sales (€104.8 million), versus 13.8% (€93.8 million) the previous year. This leverage effect was partially offset by an increase in variable marketing expenses which totaled 12.3% of sales (€114.1 million), compared with 10.9% (€74.1 million) in 2006-07. Consequently, as a percentage of sales, SG&A expenses4 decreased year-on-year to 23.6% (€218.9 million) from 24.7% (€167.9 million).

Ubisoft ended fiscal 2007-08 with operating income of €131.5 million, up from €34.6 million one year earlier. This figure includes stock option expenses of €8.5 million and an €8.4 million gain resulting from the positive outcome of a lawsuit in the first half of the year.

Net financial income came to €12.4 million (versus €18.0 million in 2006-07), breaking down primarily as follows:
- €2.9 million in financial charges against €7.0 million in 2006-07.
- €14.0 million in foreign exchange losses due to the strong increase in the value of the euro towards the end of the fiscal year (€1.7 million in 2006-07).
- A €28 million positive impact attributable to the Equity Swap - including €3.8 million following Calyon's sale of 193,153 shares during the year - compared with €27.1 million in 2006-07.

Following the sale of Ubisoft's Gameloft shares to Calyon in July 2007, the Group's share of profit of associates (principally Gameloft) decreased to almost zero from €3.1 million in 2006-07. During 2007-08 Ubisoft recorded €14.8 million under "Net gain from operations of discontinued business segment" following Calyon's sale of a portion of its Gameloft shares in the first half of the year.

Net income for 2007-08 totaled €109.8 million, up from €40.5 million the previous year, and diluted earnings per share amounted to €2.3. Excluding non-recurring items (including the impact of the Gameloft share sale, the Equity Swap, the positive lawsuit outcome and the impact of stock options), the net income figure would be €80.6 million and diluted earnings per share €1.69, versus €22.7 million in 2006-07 and €0.52 per share.

Main cash flow statement and balance sheet items

Cash flows from operating activities climbed from €53 million in 2006-07 to €117 million in 2007-08, reflecting cash flows from operations of €59 million* and a €58 million* improvement in working capital requirement (including €10.8 million from Calyon's sale of 193,153 shares).

At March 31, 2008, Ubisoft had a net cash position of €149.5 million compared with €55.0 million at March 31, 2007. The main movements during the period were as follows:
- The above-mentioned €117 million in cash flows from operating activities.
- €25 million arising from the sale of Gameloft shares.
- €48 million in acquisitions of tangible and intangible assets including the Tom Clancy license.
- The purchase of Sunflowers, Anno(TM) and Digital Kids for €18 million.
- Proceeds from issue of capital totaling €15 million following the exercise of stock options and conversion of bonds with redeemable warrants (OBSAR).
- A €3 million effect from exchange rate fluctuations.

* Future commitments on external development contracts and licenses are now included in "Other intangible assets" in the balance sheet with a contra-entry under "Trade payables". This item - which does not affect cash flow generation - rose to €80 million in 2007-08 from €37 million in 2006-07. In the "Cash flow statement for comparison with other industry players" these advances are now included in "Costs related to internal development and development of licenses" and represented €43 million in 2007-08, compared with €11.3 million in 2006-07. Before these adjustments "Costs related to internal development and development of licenses" amounted to €258.3 million in 2007-08 and €226.0 million in 2006-07.

2008-09 outlook confirmed

Ubisoft is maintaining its previously announced targets:
- First-quarter sales of approximately €154 million.
- Full-year 2008-09 sales of around €1 billion and current operating income before stock options representing at least 12% of sales.
- Based on these objectives, and in view of Calyon's sale of its Ubisoft shares (see below), the Group's net cash position is expected to amount to at least €270 million at March 31, 2009.

Sale by Calyon of all its Ubisoft shares

The 1,243,121 Ubisoft shares held by Calyon at March 31, 2008 were sold at the beginning of 2008-09. This transaction will give rise to a €59.3 million cash inflow as well as financial income of €8.8 million in the first half of the fiscal year.

Signature of a new syndicated loan

The Group did not exercise its option to renew its existing syndicated loan facility for a further one-year period and instead signed a new five-year syndicated loan agreement on May 19, 2008 for €180 million.

Kontakt

Ubisoft GmbH
Adlerstraße 74
D-40211 Düsseldorf
Jean-Benoît Roquette
Head of Investor Relations
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