Ubisoft 2007 Annual Report Download - page 35

Download and view the complete annual report

Please find page 35 of the 2007 Ubisoft annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 170

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152
  • 153
  • 154
  • 155
  • 156
  • 157
  • 158
  • 159
  • 160
  • 161
  • 162
  • 163
  • 164
  • 165
  • 166
  • 167
  • 168
  • 169
  • 170

THE GROUP’S BUSINESS ACTIVITIES AND RESULTS FOR FISCAL YEAR 2007-2008
31
1
The geographic breakdown of sales for fiscal year 2007-2008 reflected strong momentum in Europe, where the Group
enjoyed sustained growth, particularly in Nintendo DS™ products, for which it is the market leader, but also the exceptional
success of Assassin’s Creed®, which is ranked number 1 on the PlayStation®3 and number 3 on the Xbox 360®. Accordingly,
in 2007, the Group saw growth of 58% compared to market growth of only 25%. In North America, the Group’s growth was
impacted by the weakening dollar. The other regions continued to grow in importance, accounting for 7% of the Group’s
business.
Change in the working
capital requirement and
debt levels
The working capital requirement amounted to (€20) million
compared to €29 million the previous year. Factoring in
translation adjustments and the reclassification of Gameloft
stock (€25 million), this represented a €58 million improve-
ment. This year, trade payables include €80 million for
future commitments under external development and
license agreements compared to €38 million the previous
year. The strong improvement in debt and tax receivables
should be noted, the positive impact of which was offset by
the increase in inventory (+€18 million), trade receivables
(+€7 million) and financial assets line item due to the mea-
surement of the equity swap on Ubi stock.
Net financial surplus is €149 million, an improvement of
€94 million, on the back of a series of factors:
cash flow from operating activities of €59 million;
a €58 million improvement in the working capital require-
ment;
capital increases of €16 million resulting from stock
option conversions and the exercise of OBSARs (bonds
with redeemable share warrants);
capital expenditure of €48 million on property, plant and
equipment and intangible assets, including €33 million
for the Tom Clancy license (€13 million having been paid
in previous years);
the acquisitions of Sun Flowers and Digital Kids for a
total of €18 million;
the disposal of Gameloft stock for €25 million;
€3 million in translation adjustments.
Asset financing policy
The Company does not use securitization agreements, Dailly
Act assignment of receivables, or repurchase agreements,
but it uses factoring and discounting, essentially in Germany
and the UK. For the rest, it finances its peak cash require-
ments using confirmed credit facilities of up to €130 million
(including a syndicated loan of €100 million) as well as short-
term credit facilities.
Changes in the income
statement
The gross margin came in at 66.4% of revenue compared
to 64.6% for fiscal year 2006-2007. This strong growth
was expected. It reflects the growing portion of revenue
posted on new-generation consoles (86% of total revenue
compared to 60%), as well as the impact of the major suc-
cesses during the year that performed very well in terms
of returns and discounts.
Current operating profit before stock-options rose very
sharply to €133.1 million compared to €38.3 million in
2006-2007.
This increase came on the back of:
a €177.4 million increase in the gross margin, linked to
strong growth in sales (+€248.0 million) and the
improvement in the gross margin;
a €31.6 million increase in development expenses, which
accounted for 28.5% of revenue, an improvement of
nearly 5 points. This significant improvement was down
to better than expected performance on products deve-
loped internally, for which the bulk of expenses are
fixed;
a €51.0 million increase in selling, marketing and admi-
nistrative expenses, which also improved by one point to
23.6% of revenue.
Net financial income was comprised of:
€1.7 million in financial expenses, a clear improvement
on the €7.3 million the previous year,
€14.0 million in foreign exchange losses, a significant
increase on 2006-2007,
a positive impact of €27.9 million related to the equity
swap.
The €14.8 million gain on the disposal of discontinued
activities related to the disposal of Gameloft SA stock
under the equity swap agreement signed with Calyon in July
2007.
The Company recognized a tax charge of €50.0 million,
which included research tax credits of €3.5 million and a
€2.1 million expense related to a tax audit previously re-
cognized in provisions.
Earnings amounted to €110 million, representing €2.39
per share.
1.2.7 1.2.8
1.2.9