Ubisoft 2003 Annual Report Download - page 45

of Persia®2, Tom Clancy’s Splinter Cell®Chaos Theory™,
Far Cry Instincts™, Tom Clancy’s Rainbow Six®Black
Arrow, Myst®IV Revelation, Settlers®5 and Notorious: Die
to Drive™.
●Announcement of annual sales for fiscal year 2003-04:
¤508 million, +12% from the previous year.
●Ubisoft announces that its Montreal studio has developed
Tom Clancy’s Splinter Cell®Chaos Theory™, the sequel to
the popular franchise, with release planned for the end of 2004.
●An exclusive publishing agreement is signed with Square
Enix for the European release of Star Ocean™ Till the End
of Time™.
●The Ubisoft games presented at E3 received recognition
from industry professionals:
- Seven awards for Tom Clancy’s Splinter Cell®Chaos
Theory™, including Best of Show, Best PC Game, Best
Action/Adventure Game and Best Graphics for PC.
- Two awards for Prince of Persia 2: Best Action Game for
PlayStation®2 and Best Action Game for Xbox™.
- Brothers in Arms dubbed Best Action Game for PCs by
IGN.
July 2004
●Q1 FY2004-05 sales: ¤62.5m
1.10.2 Outlook and strategy for
2004-05
An increasingly competitive environment
The year 2003 was characterized by the continued upsurge in
128-bit consoles. PlayStation®2 from Sony strengthened its
leadership position with a highly significant installed base of
39.6 million units (in Europe and the United States), an
increase of 47%. Xbox™ retained its second-place position
with an installed base of 10.9 million units (same territories as
above), up 80% over 2002. GameCube™ (installed base of 9.4
million units, up 96%, in same territories) is in third place,
despite a major drop in price.
In addition, online consoles have now become standard equipment.
The majority of games developed for PlayStation®2 and
Xbox™ include an online multiplayer mode. Connection kits
have been available for Sony and Microsoft consoles since the
end of 2002. This new option marks a real technological step
forward that allows gamers to join together for joint games
and to communicate verbally in real time. With online
functionality for consoles, video games have taken on a whole
new dimension. The impact of this new option is quite positive,
since it extends the life cycle of each game.
For 2004, Ubisoft anticipates growth of 15% in the game software
market in Europe and the United States, boosted by:
●The recent drop in price for 128-bit consoles. This is expected
to increase the installed base for these consoles to about
87 million units in these territories by the end of the year.
●A volume effect related to the expansion of the installed
base of 128-bit consoles and portable consoles (supported
by the launch of Sony’s PSP and the Nintendo DS).
With regard to publishers, the trend toward consolidation that
began approximately 10 years ago – most notably in the form
of mergers-acquisitions with the likes of Broderbund, Sierra,
Cendant, GT Interactive, TLC, Time-Warner Interactive and
BMG Interactive – continued in 2002, but the focus was on the
acquisition of studios by publishers (Rare Software was acquired
by Microsoft, Z-Axis Ltd. and Luxoflux Corporation were
acquired by Activision, ValuSoft Inc. and Rainbow Multimedia
Group Inc. were acquired by THQ and so on). In 2003, this
trend was reflected in the disappearance of various industry
players (3DO, Rage Software, the closing of Electronic Arts’
online division and so on), while publishers continued their
acquisition of studios (Take 2 acquired TDK Interactive,
Activision bought out the developer Call of Duty, Warthog
acquired Fever Pitch etc.).
Consequently, the market is becoming much less fragmented:
in the United States, the Top 10 publishers (non-manufacturers)
controlled 64% of the market in 2003 compared to 62% in
2002. This trend toward consolidation is expected to continue
in the sector in the years ahead.
Outlook for 2004-05: double-digit growth and
increased profitability
Ubisoft should continue to win market share and significantly
increase its profitability.
The 2004-05 game catalog is based on a number of sequels
to extremely high-quality franchises that have been honored
in the past by industry professionals: Prince of Persia®2
(provisional title), Tom Clancy’s Splinter Cell®Chaos
Theory™, Tom Clancy’s Rainbow Six™: Black Arrow, Myst®
IV Revelation, Tom Clancy’s Ghost Recon 2™, The Settlers
Heritage of Kings™ and more.
Moreover, the group is continuing its strategy of introducing
new high-potential brands with the launches of Far Cry™
Instinct and Brother in Arms, as well as a third game in a new
genre that will be announced shortly.
The sales objective for all of these major products totals
more than 13 million units over fiscal year 2004-05.
As a result, the group is anticipating organic growth at a
constant exchange rate of at least 10% in a market that is
expected to grow by 3-5%.
As of March 31, 2005, operating income is projected to be
between ¤40 and ¤45 million according to French accounting
standards, and between ¤38 and ¤43 million according to US
GAAP pro forma standards (see definition in Section 1.3.9).
Before exceptional items, net income (before depreciation of
goodwill) is projected to be between ¤18 and ¤22 million
under French accounting standards and between ¤17 and
¤21 million according to the pro forma standard. The group
should generate net free cash flow of between ¤15 million
and ¤25 million for the fiscal year.
01
General overview
FINANCIAL REPORT
2004 45