Today, Ubisoft released its sales and earnings figures for the fiscal year ended March 31, 2011.
Sales for the fourth quarter of 2010-11 came to €178 million, down 15.2% (down 16.2% at constant exchange rates) on the €210 million recorded for the same period of 2009-10.
Full-year sales for fiscal 2010-11 totaled €1,039 million versus €871 million for fiscal 2009-10, representing an increase of 19.3% (+12.9% at constant exchange rates).
Fourth-quarter sales were higher than the guidance of around €159 million issued when Ubisoft released its sales figures for the third quarter of 2010-11. This fourth-quarter performance reflects the following:
- Continued solid sales for our dance titles.
- Successful launches for our 3DS titles, with a leading position on the console since its launch.
Main income statement items
Gross profit represented a significantly higher percentage of sales in 2010-11, coming in at 64.8% (€673.6 million) compared to 58.9% (€512.8 million) in 2009-10 and above the previously announced guidance of around 64%. This performance was due to the solid level of sell-through sales in the fourth quarter which enabled us to achieve higher-than-expected average prices.
Current operating income before stock-based compensation amounted to €29.4 million, representing a sharp increase on the €59.6 million loss reported in 2009-10. The 2010-11 figure reflects the combination of the following factors:
- A €160.8 million increase in gross profit.
- A €54.1 million increase in R&D costs to €363.5 million from €309.4 million in 2009-10. As a percentage of sales, however, these costs decreased slightly to 35.0% from 35.5%. They came in higher than the previously announced guidance of between €340 million and €350 million due to anticipated R&D depreciation recorded on a title scheduled for release in 2011-12.
- A €17.7 million absolute-value increase in total SG&A expenses to €280.7 million from €263.0 million in 2009-10 but a reduction as a percentage of sales to 27.0% from 30.2%. Overall, total SG&A expenses came in below the previously announced guidance of between €285 million and €295 million as a result of tight cost control:
− Variable marketing expenses represented 15.4% of sales (€160.4 million) compared with 16.5% (€143.6 million) in 2009-10.
− Structure costs represented 11.5% of sales (€120.3 million) compared with 13.7% (€119.4 million) in 2009-10.
Non-recurring reorganization charges
Ubisoft has taken measures to adapt its structure to major changes in the industry by reorganizing the roles and operations of its studios, which has resulted in the termination of certain projects. As a result of these terminations, as well as the decision to cease the sale of figurines in newsstands in Spain and Italy, which was made before the end of the fiscal year, the Company recognized €95.9 million in non-recurring reorganization charges, including €33.8 million in the second half of 2010-11. The total amount breaks down as €85.4 million for Research & Development and €10.5 million in other charges. Those non-recurring charges had a limited impact on cash flow.
Taking into account the above-mentioned €95.9 million in non-recurring charges, Ubisoft ended the year with an operating loss of €80.5 million, compared with a €72.1 million operating loss in 2009-10. This figure includes stock-based compensation of €12.6 million for 2010-11 (€12.1 million in 2009-10).
Net financial expense came to €3.7 million (compared with net financial income of €4.7 million in 2009-10), primarily breaking down as follows:
- €5.0 million in financial charges (€0.5 million in 2009-10). This figure included €3.6 million related to the sale of tax carry-back receivables.
- €4.3 million in foreign exchange losses, versus foreign exchange gains of €5.2 million in 2009-10.
- A €5.7 million positive impact from the sale of 2.8 million Gameloft shares. Following this transaction, 6.3 million Gameloft shares are still recorded as part of the Equity Swap.
Ubisoft reported a net loss of €52.1 million for 2010-11, representing a diluted loss per share of €0.54, versus a net loss of €43.7 million and a diluted loss per share of €0.45 for2009-10.
Excluding non-recurring items and before stock-based compensation, the Group would have generated profit for the period amounting to €21.4 million, representing diluted earnings per share of €0.22, versus a €31.6 million net loss and a diluted loss per share of €0.33 in 2009-10.
Main cash flow statement and balance sheet items (unaudited)
Cash flows from operating activities came to €64.6 million versus a negative €89.9 million in 2009-10, representing a significant year-on-year improvement. This reflects €34.2 million in cash flow from operations compared with a negative €56.7 million the previous year, as well as a €30.4 million reduction in working capital requirement against a €33.2 million increase in 2009-10.
At March 31, 2011, Ubisoft had a net cash position of €99.2 million versus €41.3 million at March 31, 2010. The year-on-year rise primarily reflects:
- The above-mentioned €64.6 million in cash flows from operating activities, which includes €11.0 million from the sale of Gameloft shares and €31.0 million sales of Canadian tax credit.
- €21.9 million from sales of tax carry-back receivables.
- €22.0 million in purchases of tangible and intangible assets.
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