Ubisoft 2004 Annual Report Download - page 47

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UBISOFT > 2005 FINANCIAL REPORT
1
GROUP’S ACTIVITIES AND PERFORMANCE DURING FISCAL YEAR 2004/2005
Outlook and strategy
for 2005/2006
An increasingly competitive environment
In 2004 the video game market saw growth of 5% in the
United States, in line with the company's expectations,
although retail shortages of PlayStation®2beginning in
the summer months and Xbox®in December had a
negative impact on software sales. In this context, the
Xbox®was the industry's big winner, with 47% growth in
game sales.
In addition, the launch of several extremely high-quality
products, including a number of mega hits such as Halo®2
(Microsoft Corporation) and Grand Theft Auto San
Andreas™ (Take 2), fuelled added competition among
publisher/developers.
Ubisoft anticipates a stable market for game software in
2005 and 2006 in both Europe and the UnitedStates,
followed by growth of 18-20% in 2007 and 2008, when
installed bases for new consoles yield full impact. Over the
short term, the portable console sector should prove the
most dynamic, as Nintendo DS™ and Sony's PlayStation®
Portable (PSP™) gain in installed basis.
Among industry firms, the trend toward consolidation is
continuing. Akklaim and Titus Interactive are among those
that have vanishedfrom the scene. Similarly, SCI's pending
acquisition of Britain's Eidos illustrates the problems
encountered by the company behind Tomb Raider®.
The number of studio acquisitions has multiplied as
companies anticipate the impact of new consoles: examples
includes Take2's purchaseof Indie; the acquisition of Toys for
Bob, Vicarious Vision and Beenoxby Activision; and the
purchase of Digital Illusion and Criterion Software by
Electronic Arts.
Many firms in the video game industry, including THQ and
Electronic Arts, are showing greater interest in the
fast-growing segment of games for mobile telephones.
With its holdings in Gameloft SA, Ubisoftis in a prime
position to benefit from growth in this market, which is
expected to exceed 40% annually over the next five years.
There is also keen competition to acquire multiyear
licensing rights in the sporting world, for organizations
such as the US Football Federation and Major League
Baseball, and in the film industry, including contracts with
Pixar and Nickelodeon.
Finally, media conglomerates such as the Disney Corporation
and Time Warner are beginning to show greater interest in
the industry, which could lead to more significant investment.
1.9.2 Middle-term outlook and objectives, 2005/2006
Ubisoft is anticipating double-digit organic growth over the
next few years, thanks to the following:
ladded creative resources with the hiring of 600 new
employees, designed to bring the company's total
production workforce to 2,900 by March 31, 2006;
lastrong debut in a number of new segments, including,
during 2005/2006:
- film licences, with two of the most anticipated films of
the year: Star Wars®Episode III: Revenge of the Sith™
and Peter Jackson's King Kong;
- sports, with AND 1®Streetball;
- strategy games, with Heroes of Might & Magic®V;
lthe strong growth in games for new consoles: seven
titles will be introduced for Nintendo DS™, five for
Sony's PlayStation®Portable (PSP™) and four for
Microsoft's new console.
Objectives for the 2005/2006 fiscal year
lFirst six months of the 2005/2006 fiscal year: sales of
approximately €155 million (representing growth of over
20% in constant terms), including €42 million in the first
three months;
lAnnual growth in sales of 12% at a constant exchange rate;
lOperating income of over €55 million under French
accounting standards (CRC 99-02);
lNet income excluding exceptional items (before
amortization of goodwill and business assets) of over
€38 million under French accounting standards
(CRC 99-02);
lNet available cash flow before acquisitions of at least
€40 million.