Ubisoft 2007 Annual Report Download - page 51

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THE GROUP’S BUSINESS ACTIVITIES AND RESULTS FOR FISCAL YEAR 2007-2008
47
1
Equity risk
The Company has main types of equity investments:
Stock held directly pursuant to a market-making and li-
quidity agreement signed with Exane BNP. These purchases
are made under the terms of a market-making agreement
that complies with all applicable regulations, and are
designed to ensure liquidity of stock purchases and sales.
As of March 31, 2008, the Company had 30,371 shares,
worth €1,573 thousand.
An equity swap agreement on stock: this derivative is re-
cognized in the balance sheet at fair value. Any fluctua-
tions in the share price compared to the €9.33 disposal
price are recognized in income.
A total of 193,153 shares were disposed of during the
year, leaving 1,243,121 shares as of March 31, 2008.
An equity swap agreement on Gameloft stock: this deri-
vative is recognized in the balance sheet at fair value.
Any fluctuations in the share price compared to the
€6.08 sale price are recognized in equity. A total of
4,189,198 shares were disposed of during the year, lea-
ving 9,178,755 shares held as of March 31, 2008. A one
euro fall in the share price would thus reduce equity by
€9,178 thousand.
A potential fall in the price of Ubisoft stock and Gameloft
one would be a risk.
Investment policy
All cash must remain highly liquid, and the risk to the ca-
pital must be kept to a minimum. Cash must thus be
invested in products that are very secure and have very
low volatility. All the products in which the Group invests
are compliant with the criteria established by IAS 7.
Accordingly, certain principles of conservatism regarding
the Group’s cash management must be observed:
Never place more than 5% of the net assets in a single
fund,
Never invest more than 20% of total cash in the same
vehicle.
The Group diversifies its investments with top tier coun-
terparties, using money market vehicles with maturities of
under three months.
As of March 31, 2008, the Group’s cash was invested in
money market investment companies and certificates of
deposit with maturities of under three months.
Liquidity risk
As of March 31, 2008, the Group had financial debt of
€79.4 million and net cash (including liquid assets and
short-term investment securities) of €149 million.
With the exception of a €20 million borrowing, financial
debt as of March 31, 2008 consisted mainly of inter-com-
pany cash pooling transactions.
In order to finance short-term needs related to increases
in working capital during especially busy periods, the
Group had a €100 million syndicated loan, €30 million in
confirmed credit facilities, and other bank credit facilities
totaling €76 million as of March 31, 2008.
The option to renew the syndicated loan for one year was
not exercised. A new agreement was signed in May 2008
for €180 million over 5 years.
The syndicated loan and the confirmed bank loans are go-
verned by financial covenants that are based on the ratio
of net debt to equity and of net debt to cash flow from
operating activities.
Liquidity Risk Figures
Covenants
Under the terms of the syndicated loan and the €20 million
bilateral line, the Company is required to respect certain
covenants.
The covenants are as follows:
Furthermore, in 2006-2007, the Company signed a €10
million line, which is subject to the same covenants but
uses 0.9 for the net debt/equity ratio.
All covenants are calculated on the basis of the consoli-
dated annual financial statements under IFRS.
As of March 31, 2008, the Company was in compliance
with all of these ratios and expected to remain so during
the 2008-2009 fiscal year.
Bank overdrafts
Bank overdrafts are used to finance occasional cash short-
falls arising from changes in working capital requirements.
They can be offset via notional cash pooling by available
cash reserves in other Group companies.
Finance leases
Finance leases mainly relate to computer equipment
leased for terms of at most three years. During the fiscal
year there were no new borrowings and repayments
totaled €55 thousand.
03.31.08 03.31.07
Bank Loans 23,323 23,254
Trade Payables 177,903 118,950
Derivative Instruments 1,353 -
2008-2009 2007-2008
Net debt restated for assigned
receivables / equity
restated for goodwill < 0.80 0.85
Net debt restated for assigned
receivables / EBITDA < 1.5 1.5