Ubisoft 2002 Annual Report Download - page 40

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2003
40
FINANCIAL
REPORT
a volume effect related to the expansion of the installed
base of 128-bit consoles and portable consoles (supported by
the launch of GBA SP in early 2003).
With regard to publishers, the trend toward consolidation
that began approximately 10 years ago, most notably in the
form of merger-acquisitions with the likes of Broderbund,
Sierra, Cendant, GT Interactive, TLC, Time-Warner Interactive
and BMG Interactive, continued in 2002. The focus, however,
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 by THQ,etc.).These transactions
also resulted in the disappearance of some market participants,
primarily the smaller developers, though publishers such as
Cryo Interactive and 3DO were also affected. Furthermore,
certain publishers are experiencing difficult financial situations
or having difficulty financing the investments required for
their development. As a result, only a small group of market
players has been able to maintain a high level of quality and
innovation:Activision,Electronic Arts,Take Two,THQ,Atari and
Ubisoft.
Despite this, the market remains highly fragmented. In the
United States, the top 10 publishers (non-manufacturers)
control only 62% of the market.This trend toward consolidation
is expected to continue in the sector in the years ahead.
1.8.2 A Look Ahead at Fiscal Year
2003/2004
Ubisoft begins fiscal year 2003/2004 with eight major titles
in its portfolio compared with five last year:
Prince of Persia The Sands of Time™: was chosen as best
action/adventure game at the E3 professional trade show
in May 2003.
Tom Clancy’s Splinter Cell™: Pandora Tomorrow: to date,
4.5 million copies of the first version of this blockbuster have
been sold.The new episode is scheduled for March 2004.
Tom Clancy’s Rainbow Six®3: a completely new console
version will be available by this holiday season.
XIII: this game will offer an original adaptation of a graphic
novel as a video game.
Uru™: Ages Beyond MYST: this is the fourth episode of this
standard-setting adventure game. It will be enriched with
online content.
Beyond Good and Evil™: the new action-adventure game
from the creator of Rayman.
Far Cry™: a game of remarkable precision built on a future-
generation engine that pushes the limits of action games.
Tom Clancy’s Ghost Recon™: Island Thunder™; the American
elite unit,The Ghosts,is back and ready for action.The game
will offer 12 maps designed for multiplayer mode on
XboxTM Live.
The sales target for these eight major products is more than
10 million units in 2003/2004.With Prince of Persia The Sands
of Time™ and Beyond Good and Evil™, Ubisoft intends to
establish itself as a leader in the vast action/adventure game
segment. Furthermore, with Far Cry™ and XIII, Ubisoft is
aiming at a significant breakthrough in the FPS segment
(First-Person Shooter).
In 2003/04, with 65 new products and a particularly
well-rounded baseline catalog, the Group foresees organic
growth at constantexchange rates on the order of 17% to 22%.
Operating income is projected to be between 42 and
48 million according to French accounting standards, and
between 45 and 51 million according to US GAAP pro
forma.Before exceptional items,net income (before depreciation
of goodwill and business assets) is projected to be between
19 and 23 million according to French accounting standards
and between 21 and 25 million according to the US GAAP
pro forma standard. Finally, the Group should generate
net free cash flow of between 40 million and 50 million
for the fiscal year.