Annual Report
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ANNUAL REPORT 12 A statement from Yves Guillemot Ubisoft registered a solid performance in FY2011-12 due to the success of Just Dance®, Assassin’s Creed® and our online games. FY2012-13 should mark a turning point for Ubisoft thanks to a stronger offering for core gamers, popular casual titles and continued momentum for our online games. We therefore expect sustained growth and increased profitability in FY2012-13. Looking farther ahead, we believe the arrival of the next generation of consoles, the integration of the mechanics from social gaming and the item-based model represent significant opportunities for the industry and for Ubisoft in particular. Our annual sales for FY2011-12 reached €1.061 billion. This result is driven by our franchises for core gamers - Assassin’s Creed, The Settlers® Online, Rayman® and Driver® - and by our casual titles, with a strong showing for Just Dance and Howrse® and the successful launch of Rocksmith™ in North America. Our current operating income grew by 90% to €56 million while our online and digital revenue was up 111%. Finally, our net-cash position as of March 31, 2012 reached €84.6 million. We have therefore ended the year in a solid financial position all the while continuing to invest in our future. All of the efforts and investments we’ve made over the past few years to continually improve the quality of our titles for core gamers and to develop the online segment should translate into a sharp increase in our revenue and profitability, starting 2012-13: - The console market has grown steadily over the past few years, up 40% in 2011 versus the highs of the prior cycle in 2005. This increase underscores the strength of the Xbox 360® and PLAYSTATION® 3 experience for core players. Huge opportunities await us as we have an extraordinary line-up, whose diversity and originality aroused great admiration at E3 (Electronic Entertainment Expo) this year. Assassin’s Creed 3 is on track to becoming the biggest launch in company history thanks to a new hero, a new engine, new gameplay, fantastic landscapes and impressive crowd-rendering – after three years of well-planned and executed development, the title looks stunning. We are also making a strong return to the shooter segment, the biggest genre in the industry, accounting for 35% of sales in the whole market, with two big franchises on console: Tom Clancy’s Ghost Recon Future Soldier™ and Far Cry® 3. We are also very excited about the return of the Splinter Cell® franchise with the arrival of Tom Clancy’s Splinter® Cell Blacklist™ set for Spring 2013. - On the online and digital front, we expect to differentiate ourselves with high-quality games and reputable brands. Our performance will be driven by purely online titles, as well as titles for XBLA, iOS and Android. To pursue our expansion into the booming free-to-play market, we plan to launch new core titles for PC players: Ghost Recon® Online, Silent Hunter® as well as Shootmania® which targets the rapidly-growing community of eSports’ enthusiasts. We will also continue to leverage our first successful titles - Howrse® and The Settlers Online. On XBLA, we released Trials Evolution in May to a metacritic score of 91% and the highest grossing day one sales in XBLA history. Finally, a free-to- play social game for mobile based on the Assassin’s Creed brand will be launched at the end of 2012. - We also believe there to be many opportunities in the casual segment. Our objective is to reinforce our Just Dance franchise by leveraging its growth potential across Continental Europe and Asia and also by bringing it to the Wii U™, Nintendo’s new console for which we will launch five casual titles. We also plan to expand the success of our new franchise Rocksmith to EMEA territories. On the long term, we expect to capitalize on two major trends. Firstly, we believe that the next generation of consoles is going to boost the market; these machines will integrate the social gaming revolution and item-based model, not to mention amazing graphics, highly sought-after by core gamers. Secondly, the continued strong growth of the free-to-play market will allow us to bring our brands to more platforms (PC, tablet and mobile) and to significantly increase the impact and geographical reach of our brands. All this combined should drive an increase in the Average Revenue Per User (ARPU) and profitability of all our games. Ubisoft, as a unique creator of brands for both core and casual players, is ideally positioned to reap the benefits of these trends. I know we have the talent and energy to seize the many opportunities to grow and increase profitability that lie ahead of us, in 2013 and beyond. Our aim is to create increasingly strong entertainment experiences for gamers, wherever they are and on every platform. In closing, I would like to extend my gratitude to Ubisoft’s talented teams whose creativity and motivation bring our company’s vision to life, as well as to our shareholders and consumers for their support. ANNUAL REPORT 2012 This French version of the Annual Report was recorded on July, 2 2012 in accordance with Article 212-3 of the Autorité des Marchés Financiers General regulation (The French Securities and Exchange Commission). This document is a translation of the Reference document of the Ubisoft group for the year ended March 31, 2012. Its purpose is to assist English speaking readers. The greatest attention has been paid to its preparation. However, the only official document is the 2012 Reference Document in French, filed with the French securities regulator (Autorité des Marchés Financiers – AMF) on July 2, 2012. CONTENTS MANAGEMENT REPORT ...................................................................... 2 1 The Group’s business activities and results for financial year 2011/2012 ...................................... 2 2 Comments on the Ubisoft Entertainment SA Financial Statements for the year ended March 31, 2012 ....................................................................................................................................................... 42 3 Information on the Company and its capital .................................................................................. 44 4 Corporate governance ................................................................................................................... 63 FINANCIAL STATEMENTS .................................................................. 76 1 Consolidated financial statements as at 31 March 2012 ............................................................... 77 2 Report for the consolidated account statements for the fiscal year ending March 31, 2012 ...... 127 3 Corporate Financial Statements of Ubisoft Entertainment SA for the year ended March 31, 2012…. ................................................................................................................................................ 129 4 Auditor’s General report on the fiscal year ending March 31, 2012 ............................................ 156 5 Statutory auditor’s special report on regulated agreements and commitments for the year ended March 31, 2012 .................................................................................................................................... 158 GOVERNANCE AND INTERNAL CONTROL .................................... 162 1 Report of the Chairman of the Board of Directors on corporate governance and internal control….. ............................................................................................................................................ 163 2 Auditor’s report prepared pursuant to Article L.225-235 of the French Commercial Code, on the report of the Chairman of the Board of Directors of Ubisoft Entertainment SA ................................... 181 INFORMATION ABOUT THE COMPANY .......................................... 183 1 Persons responsible for the reference document ........................................................................ 184 2 Financial communications informations....................................................................................... 185 MANAGEMENT REPORT 2 Management Report 2012 1 THE GROUP’S BUSINESS ACTIVITIES AND RESULTS FOR FINANCIAL YEAR 2011/2012 1.1 GROUP PRESENTATION In 2011, Ubisoft® was ranked third worldwide among independent publishers in terms of physical game sales (sources: NPD, Chart-Track, GFK etc.). The Group’s activities are centered around development, publishing and distribution of video games for portable and home consoles, the PC, smartphones and tablets in both physical and online formats. These games are aimed at two distinct categories of gamer: - Habitual gamers, - Casual gamers. Ubisoft currently employs 6,930 staff. 1.1.1 HISTORY In a constantly evolving industry, the Group has built and is continuing to establish solid foundations that allow it to anticipate the entertainment of the future. 1986: Creation of Ubisoft by the five Guillemot brothers. 1989-1995: International expansion Ubisoft opens its first distribution subsidiaries in the US, Germany and the United Kingdom and its first internal development studios in France and Romania. Rayman® – the first major franchise – is released in 1995 followed by Raving RabbidsTM. The game has attracted over 34 million gamers to date. 1996-2001: Organic growth and strategic acquisitions Flotation on the Paris stock exchange in 1996. Opening of new studios (Shanghai in 1996, Montreal in 1997, Morocco, Spain and Italy in 1998, Annecy and Montpellier in