Montreuil, December 12, 2002 2002/2003 First-Half Results
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Montreuil, December 12, 2002 2002/2003 first-half results : profitability impacted by significant seasonal trends (19% of sales). Quality games and efficient marketing bring a new dimension to Ubi Soft within the international video game industry. Growth targets for 2002 / 2003 confirmed, as second-half sales show strong momentum and margins improve. Ubi Soft today announced consolidated results for the 2002/2003 first half ending September 30, 2002. Financial highlights H1 H1 (in millions of euros) 2002/2003 2001/2002 Sales 83.6 113.4 Gross margin 38.1 66.4 As% of sales 46% 59% Operating income (excluding goodwill) - 54.7 0.4 Goodwill amortization - 2.7 -1.7 Net financial expenses - 9.0 -4.4 Exceptional items - 1.1 1.4 Corporate tax 12.3 1.5 Net income (before goodwill amortization) - 52.5 -1.1 Net income (after goodwill amortization) - 55.2 -2.8 Note: the fiscal year runs from April 1 to March 31. A complete income statement, balance sheet and pro forma presentation are attached. 1 / 3 Profitability impacted by significant seasonal trends Given the strong seasonal nature of the fist-half œ sales represent 19 percent of total estimated annual sales, versus 31 percent last year œ the figures for the first six months of the year should not be extended to the full-year performance. Gross margin declined because of the increased contribution of back catalogue products, which traditionally generate lower returns. Royalty charges increased significantly (14.5 million euros vs. 11.8 million euros in the first half of 2001/2002). This rise reflects the atypical weighting of "publishing" and "distribution" activity in the six- month product mix (44% vs. 22% in 2001/2002). Finally, depreciation charges continued to increase as expected, totaling 27.9 million euros compared with 20.8 million euros in the first-half 2001/2002. Net financial expense includes the following items: - 5.6 million euros interest on borrowing - 20.4 million euros in provisions for treasury stock held at September 30, 2002 - 14 million euros in gains from the redemption of 752,000 OCEANES 2.5% convertible bonds completed in the first half - 3 million euros gains on currency hedges Exceptional items included a 3.9 million euros income on a litigation settlement and a 4.1 million euros expense essentially related to the accelerated depreciation of royalties. Quality games and efficient marketing bring a new dimension to Ubi Soft within the international video game industry. In response to the market's increased selectivity, Ubi Soft has pursued a strategy focused on high-quality, AAA products. Today, this strategy is paying off. The Group now stands out as a major player in the industry supported by the quality of its developments, its effective marketing and worldwide distribution network. The games to be released in the second-half are an example of this success : - Tom Clancy‘s Splinter Cell™ X-box : The game earned an average grade of 94.4 out of 100 (based on 54 reviews). With 1.1 million preorders at the time of launch (end-November), the game has already achieved 480,000 sell through in 3 weeks in North America and Europe. As a result, it has not only been ranked No. 1 on Xbox in all countries since its launch, but also No. 3 in all categories combined in the U.S. (Source : UBS Warburg, week of 04/12/02) . In light of new orders received so far, the Group is raising its estimates for 2002/2003 sales from 1.1 million to 1.5 million copies for the Xbox format. - Tom Clancy‘s Ghost Recon™ consoles: This is one of the first games produced for Xbox Live . The successful integration of the multiplayer on-line functionalities fully benefited from the Microsoft on-line Kit success. This game has already received several reviews that are higher than 90 out of 100 from the trade press. It was elected " Editor‘s Choice" by the official X-box magazine. In total, 900,000 units should be sold for all gaming consoles during the fiscal period. - Rayman ®3 : Hoodlum Havoc : The game will be launched worldwide on five platforms in March 2003. Excellent reviews already published together with the quality of the product and the franchise should make this game another blockbuster. - Raven Shield™ PC : Based on the response of the trade press (Computer Gaming World, Gamespy.com and PC Team) and players alike, it should be among the best selling PC games in 2003. 2 / 3 Growth targets for 2002/2003 confirmed: second-half sales show strong momentum and margins improve In light of strong second-half sales forecast for Ubi Soft's key products, the Group is confirming its targets for 2002/2003. Forecasted sales should be between 430 and 450 million euros, up between 17% and 22% on the prior year, on a constant perimeter and exchange rate basis. In addition, the high margins of these flagship products should contribute to a gross margin of around 64% in the second half and 61 % for the full twelve-month period. Finally, the proportion of royalties paid to third parties will decrease in the second half, as the contribution to sales from products developed by Ubi Soft's own studios increases. In light of these factors, Ubi Soft is forecasting operating income of between 85 and 90 million euros in the second half. For the full year, operating income should be between 35 and 40 million euros according to French accounting standards and between 29 and 34 million on a pro forma basis (U.S. GAAP). Next financial announcements: - third-quarter sales: the 5th of February, 2003 - 2002 / 2003 annual sales: the 7 th of May 2003 - 2002 / 2003 annual earnings: the 26 th of June 2003 © Ubi Soft Entertainment. All Rights Reserved. Rayman logo and character, Splinter Cell, Ubi Soft and the Ubi Soft logo are trademarks of Ubi Soft Entertainment in the US and/or other countries. © Red Storm Entertainment. All Rights Reserved. Covert Operations Essentials, Raven Shield, Red Storm and Red Storm Entertainment are trademarks of Red Storm Entertainment in the US and/or other countries. Red Storm Entertainment, Inc. is a Ubi Soft Entertainment company. Microsoft, XBox, the Xbox logo, are either registered trademarks or trademarks of Microsoft Corporation. in the US and/or other countries.© Copyright by UBS AG, 1999-2002 - all rights reserved All other trademarks are the property of their respective owners. About Ubi Soft® Entertainment Ubi Soft Entertainment is an international producer, publisher and distributor of interactive entertainment products. A leading company in the multimedia industry, Ubi Soft's strong and diversified lineup has grown considerably, as has Ubi Soft itself. As well as steadfastly continuing to partner with several high-profile companies, Ubi Soft has also confirmed its presence on the global market by developing its own exceptional properties. Founded in 1986 in France, Ubi Soft is now present on every continent, both through offices in 22 different countries including the United States, Brazil, Morocco, Germany and China and through sales of products in over 50 countries. The group is dedicated to delivering high-quality, cutting-edge video game titles to consumers around the world. To learn more, visit www.ubi.com. Contact: Ubi Soft ® Entertainment Nathalie Balourdet œ Investor relations 28, rue Armand Carrel œ 93108 Montreuil-sous-Bois Cedex - FRANCE Tel.: + 33 (0) 1 48 18 56 34 / Fax: + 33 (0) 1 48 18 52 82 e-mail: [email protected] Appendices 3 / 3 Consolidated Accounts at September 30, 2002 Consolidated Balance Sheet at September 30, 2002 in thousands of euros ASSETS Gross Amort/ Net Net Net Net Depr 30.09.02 30.09.02 30.09.02 31.03.02 30.09.01 31.03.01 Goodwill / trade marks and patents / business assets 120.151 9.734 110.417 111.970 114.086 110.342 Intangible assets 270.827 87.669 183.158 163.303 155.614 125.551 Tangible fixed assets 36.248 22.336 13.912 13.353 12.316 12.465 Financial assets 11.885 2.287 9.598 20.496 11.854 11.415 Fixed assets 439.111 122.026 317.085 309.122 293.870 259.773 Inventory and work-in-progress 47.539 1.327 46.212 48.645 42.063 46.674 Advances and installments paid 59.322 - 59.322 55.097 59.722 37.626 Trade receivables 75.742 2.292 73.450 106.478 77.592 79.991 Other receivables, prepayments and deferred income 102.595 352 102.243 70.176 60.294 52.323 Investments securities 34.883 20.024 14.859 40.365 29.120 51.195 Cash 52.358 - 52.358 30.548 22.660 34.986 Current assets 372.439 23.995 348.444 351.309 291.451 302.795 Total Assets 811.550 146.021 665.529 660.431 585.321 562.568 LIABILITIES AND STOCK EQUITY 30.09.02 31.03.02 30.09.01 31.03.01 Capital (1) 5.395 5.384 5.256 5.156 Premiums (1) 268.022 266.406 264.854 259.343 Consolidated reserves and earnings (2) -24.538 36.959 25.683 28.562 Other (3) 362 306 218 173 Share Capital (Group share) 249.241 309.055 296.011 293.234 Minority interests 0 0 0 203 Provisions for risks and charges 1.309 481 195 190 Borrowings 301.982 228.897 199.044 173.432 Current accounts of the partners 0 1.218 1.186 1.187 Advances and installments received 2 3.637 413 4.367 Trade creditors and other accounts payable 56.049 62.295 50.329 55.483 Sundry creditors and accrued expenses 56.946 54.848 38.143 34.472 Total debts and accounts payable 414.979 350.895 289.115 268.941 Total Liabilities 665.529 660.431 585.321 562.568 (1) Of the consolidated parent company (2) Including net income for fiscal year -55.210 7.953 -2.769 3.619 (3) including investment grants 362 306 218 173 4 / 3 Consolidated Income Statement at September 30, 2002 in thousands of euros 30.09.02 31.03.02 30.09.01 31.03.01 Net Revenue 83.574 368.961 113.382