Ubisoft 2009 Annual Report Download - page 39

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1.1.7.4 Market risks
Financial risks:
In the course of its business, the Group is exposed to varying degrees of financial risk (foreign-exchange,
financing, liquidity, interest-rate), counterparty risk and equity risk.
Group policy consists of:
• minimizing the impact of its exposure to market risks on both its income and, to a lesser extent, its
balance sheet,
• tracking and managing this exposure centrally whenever regulatory and monetary circumstances allow,
• using derivatives for hedging purposes only.
The risk management policy and its organization within the Group – notably through the Treasury
Department, attached to the Finance Department – are described in the Chairman’s internal audit report.
Additional information and figures on exposure to these different risks are detailed in Note 16 to the
consolidated financial statements.
1/ Foreign-exchange risk
In light of its international presence, the Group may be exposed to exchange-rate fluctuations in the following
three cases:
• through its operating activities: sales and operating expenses of Group subsidiaries are largely
denominated in local currency. However, some transactions, for example license agreements and
intercompany invoicing are denominated in another currency. The subsidiaries operating margin
concerned may therefore be exposed to fluctuations in exchange rates involving their operational
currency;
• through its financing activities: applying its policy of centralizing risks, the Group has to manage
financing and cash in various currencies;
• during the process of translating the accounts of its subsidiaries from foreign currencies into euros:
current operating income may be generated in currencies other than the euro. As a result, fluctuations in
foreign currencies the exchange rates against the euro may have an impact on the Group’s income
statement. These fluctuations also affect the carrying amount of assets and liabilities denominated in
foreign currencies and appearing in the consolidated balance sheet.
The sensitivity of Group earnings to changes in the value of its main currencies is described in Note 16 to the
consolidated financial statements.
2/ Financing and liquidity risk
In the course of its operating activity, the Group has no recurrent or significant debts. Operating cash flows
are generally sufficient to finance operating activity and organic growth. However, the Group may need to
increase its debt by using credit lines to finance Merger & Acquisition activity. In order to finance temporary
needs related to increases in working capital during especially busy periods, the Group has a €180 million
syndicated loan, €30 million in confirmed credit facilities and other bank credit facilities totaling €74.5 million
at March 31, 2010.
The Group’s liquidity risk mainly lies with the maturity of the €20 million debt on which interest is paid, as well
as payment flows on derivatives, and this risk is therefore not significant.
3/ Interest-rate risk
Interest-rate risk is mainly incurred through the Group's interest-bearing debt. This is essentially euro-
denominated and centrally managed. Interest-rate risk management is primarily designed to minimize the
cost of the Group's borrowings and reduce exposure to this risk. For this purpose, the Group uses primarily
fixed-rate loans for its long-term financing needs and variable-rate loans to finance specific needs related to
increases in working capital during particularly busy periods.
At March 31, 2010, the Group’s net debt included a variable-rate loan and bank overdrafts which, given the
Group’s positive net cash position, are used essentially to finance the high year-end working capital
requirement entailed in the highly seasonal nature of the business.
The sensitivity of debt to a change in interest rates is described in Note 16 to the consolidated financial
statements.