Ubisoft 2005 Annual Report Download - page 53

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UBISOFT • 2006 ANNUAL REPORT
FINANCIER
The group’s activities and performance for fy 2005-06
recorded as earnings. Since 918,137 shares were sold, the
impact of a reduction in the share price of one euro would
be €918 thousand.
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 solid balance sheet and the level of available
capital (the result of bond issues in the amount of €142
million and a syndicated loan for €100 million) should
minimize any risk related to these transactions.
There are some possible risks nonetheless:
- a dilution of the current share ownership,
- the creation of significant long-term debt,
- potential losses,
- the establishment of provisions for goodwill and other
intangible assets,
- a negative impact on profitability.
Moreover, the possible loss of key staff of the target com-
pany 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.
Risk related to funding
issues
As of March 31, 2006, the group’s financial indebtedness
stood at €202 million, while net indebtedness (reflecting
liquid assets, redemption premiums and short-term invest-
ment securities) totaled €65 million.
Net indebtedness primarily serves to finance the Group’s
working capital requirements, and thus short-term assets.
Theoretically, therefore, the Group is only slightly expo-
sed to any liquidity risk related to short-term financing of
a long-term asset.
As of March 31, 2006, financial debt consisted primarily of
bond liabilities, of which 27% have a maturity of at least
one year.
In order to finance temporary needs related to increases in
working capital requirements during particularly active
periods, the group has a syndicated loan of €100 million
and has also established lines of credit with banking insti-
tutions totaling €86 million as of March 31, 2006.
The OCEANE issue (which matures in November 2006) is
not subject to financial covenants.
The syndicate loan and the share subscription warrants
(OBSAR) 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 15 of Section 2.5.4.
1.8.11
1.8.12
Commitments
The Group’s management has made no firm commitments on future investments.
Insurance
1.9
1.10
Coverage limits France United States Canada China
in thousands in thousands in thousands of in thousands of
of euros of US dollars Canadian dollars Chinese yuan
Professional indemnity insurance 9,485 3,800 16,010 1,000
Property insurance 4,254 6,816 30,081 6,000
Inventory insurance 7,865 7,000 1,250 -
The Group holds international coverage with regard to professional civil liability.
Each subsidiary is covered for risks relating to property damage, vehicles, apartments rented to employees on tem-
porary assignments, inventory and transport to customers, in addition to holding medical coverage, travels, etc.
Each subsidiary outside France modifies and manages its local coverage in accordance with its business operations
and the specific needs in each country.
The professional indemnity and third party liability insurance held by Ubisoft Entertainment covers the entire world
except the United States, Canada and Japan.
The following table summarizes the coverage limits for each type of insurance carried by the primary entities: