Ubisoft 2006 Annual Report Download - page 50

UBISOFT • FINANCIAL REPORT 2007
Ubisoft key figures at March 31, 2007
3,934 employees (average staff during the year: 3,734), nearly a 15% increase since March 31, 2006.
Ubisoft employees in 22 countries.
81% in production activities and 19% in business activities.
An average age of 31 years.
Average seniority of 3.5 years.
Human resources
1.3.2
1.4
Cash flow
Publishers have two types of cash flow:
cash flows needed to finance development costs are
spread out evenly over an 18 to 24-month period, bea-
ring in mind that each project intensifies gradually but
that teams are allocated to several projects. This cash
flow amounted to more than €226 million in 2006/2007;
cash flows needed for the marketing of games are cha-
racterized by strong seasonal trends (25% of sales are
realized during the first half of the calendar year and
75% during the second) and a gap between production
costs and the collection of revenues. Indeed, the com-
pany must first finance the manufacture of products,
which represent 35% of sales and are payable within 30
days on average, and also finance marketing expenses
(approximately 12% of sales) before collecting revenue
an average of 80 days after the products are made avai-
lable in stores. For this reason, the company must
finance major cash-flow peaks around Christmas and
experiences an increase in cash flow between February
and March. This pattern may change if the fourth quar-
ter of the fiscal year is very strong since the working
capital requirement may then be greater.
Thus in fiscal year 2006/2007, the company’s net debt ran-
ged from -€55 million to €100 million, with the peak debt
period occurring between November and January.
Borrowing terms
and financing structure
In 2006/2007, most of the financing used resulted from
the 2006 OCEANE bond (€89 million) and the OBSAR
bond (€52 million). Since both these bonds combined
represent more than the company’s net debt, Ubisoft has
not had to use the €100 million syndicated loan obtained in
May 2005 or the bilateral lines of credit issued by banks,
and has invested cash surpluses on a regular basis.
The average cost of borrowing is 6.29%, as explained in
detail in section 1.9.11.
There are no financial covenants limiting the use of the
OCEANE, which was redeemed in November 2006. The
covenants that must be respected with regard to the
OBSAR, which was redeemed in February 2007, the syndi-
cated loan, and the bilateral lines of credit obtained in
2006/2007 for €20 million are as follows:
Furthermore the company signed in 2006/2007 a 10 M€
credit line which uses the same covenants but with a net
debt to equity ratio of 0.9.
For FY 2007/2008, and barring a major acquisition, Ubisoft
should be able to finance its operations using its cash flow
and the various lines of credit extended to it, including
€130 million in confirmed lines (€100 million of which is
from the syndicated loan) and €93 million in short-term
lines.
1.3.3
2007/2008 2006/2007
Net debt restated to reflect
assigned receivables/equity
restated to reflect goodwill < 0.85 0.9
Net debt restated to reflect
assigned receivables/Ebitda < 1.5 1.5