Ubisoft 2006 Annual Report Download - page 63

THE GROUP'S ACTIVITY AND RESULTS FOR FISCAL YEAR 2006-2007
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1
With the exception of a loan in the amount of €20 million,
financial debt consists mainly of intra-group cash pooling
transactions as shown in the accounts.
In order to finance temporary needs related to the
increase in working capital during especially busy periods,
the group has a syndicated loan in the amount of €100 mil-
lion, confirmed lines of credit for €30 million, and other
lines of credit with banking institutions totaling €93 million
at March 31, 2007.
The syndicated loan and the confirmed bank loans are
governed by financial covenants that are based on the ratio
of net debt to equity and that of net debt to cash flow from
operating activities.
Risk related to future
acquisitions and
integration of acquired
companies
The company may undertake external growth operations in
the medium and/or long term. The company’s sound
balance sheet, which shows a positive net financial position
of €55 million and the level of available capital (including
a syndicated loan of €100 million and €30 million in confir-
med lines of credit) should minimize the risks related to
these operations.
However, there is a possibility of certain risks:
the dilution of current share ownership as a result of a
share-based acquisition,
the creation of significant long-term debt,
possible losses that could have a negative impact on pro-
fitability,
the setting aside of provisions for goodwill and other
intangible assets.
The possible loss of key staff at 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 posi-
tion. Ubisoft has, however, always demonstrated a high
level of proficiency in integrating its acquired companies.
Commitments
On April 6, 2007, acquisition of the AnnoTM brand through the buyout of the German publisher Sunflowers Interactive
Entertainment Software GmbH for €14.2 million.
Through the transaction, Ubisoft will acquire a 30% stake in Related Designs Software GmbH, which developed Anno 1701.
Ubisoft reinforces its position in the real-time strategy market. AnnoTM, along with Ubisoft’s The Settlers®, is one of the
most well known franchises in Germany.
The group’s management has made no firm commitments on other future investments.
Insurance
1.9.12
1.10
1.11
Description of insurance
The group carries third-party liability insurance held by Ubisoft Entertainment SA which covers the entire world except the
United States, Canada and Japan.
Each subsidiary has coverage for:
risks related to property damage,
vehicles,
apartments rented to employees on assignment,
inventory,
transport provided to customers, etc.
Foreign subsidiaries adapt and manage their local coverage based on their business activity and each country’s specific
requirements.
Ubisoft has signed a personal assistance contract for employees on business-related assignments in France and abroad. This
contract covers all employees of French sites who require assistance and foreign repatriation.
The group’s business operations do not in themselves pose an exceptional risk with regard to work-related accidents.
Certain companies, particularly those in the US, the UK, Italy and Denmark, are insured against loss of business continuity.