Ubisoft 2004 Annual Report Download - page 45

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43
UBISOFT > 2005 FINANCIAL REPORT
1
GROUP’S ACTIVITIES AND PERFORMANCE DURING FISCAL YEAR 2004/2005
Risk related to future
acquisitions and
integration of companies
acquired
The company may undertake transactions for the purpose
of external growth in the medium and/or long term. The
company's strong balance sheet and the level of available
capital (resulting from convertible bond issues in the
amount of €172 million and a syndicated loan for
€97.5 million) should minimize the risk related to these
transactions.
There are some possible risks nonetheless:
ladilution of the current share ownership;
lthe creation of significant long-term debt;
lpotential losses;
lthe establishment of provisions for goodwill and other
intangible assets;
lanegative impact on profitability.
Moreover, the possible loss of key staff of the target
company must be considered among the risks related to
mergers and acquisitions. Such a loss could have a negative
effect on the acquired company's sales, earnings and/or
financial situation. Nonetheless, Ubisoft has always
demonstrated a high level of proficiency in integrating its
acquisitions.
1.6.11 Risk related to liquid
assets
As of March 31, 2005, the group's financial indebtedness
stood at €286,000,000, while net indebtedness (reflecting
liquid assets, redemption premiums and short-
term investment securities) totaled €81,200,000. Net
indebtedness primarily serves to finance the group's working
capital requirements, and thus short-term assets.
Theoretically, therefore, the group is only slightly exposed
to any liquidity risk related to short-term financing of a long-
term asset.
As of March 31, 2005, financial debt consisted primarily of
bond liabilities, of which 85.5% have a maturity of at least
one year.
In order to finance temporary needs related to the increase
in working capital during especially active periods, the group
has also established lines of credit with banking institutions
totaling €76.5 million as of March 31, 2005.
The convertible bond of €25 million (maturing in July 2005)
and the OCEANE bond (convertible and/or exchangeable
into new or existing shares) of €92 million are not subject to
financial covenants.
The lines of credit provided by banking institutions, as well as
the €55 million bond with redeemable share subscription
warrants established in November 2003, are governed by
financial covenants that are based on the ratio of net debt to
equity capital and that of net debt to total cash flow from
operating activities. These covenants are described in
Note 14 of Section 2.1.6.4.
1.6.12