Ubisoft 2009 Annual Report Download - page 17

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13
The gap between Europe and North America narrowed during the financial year, largely owing to the
weakness of the market for the Nintendo DS™ in Europe. The previous financial year had also been marked
by higher Distribution sales than usual in Europe.
1.1.2.6 Changes in the income statement
The gross margin as a percentage of sales was down at 58.9 % (€512.8 million) compared with 60.5 %
(€639.5 million) in 2008/2009. As announced previously, this drop is chiefly due to the sharp decline in back-
catalogue sales, which went from €220 million with a gross margin of around 50 % in 2008/2009 to €110
million and a negative gross margin of around -10 % in 2009/2010. The back catalogue for 2009/2010
suffered, among other things, as a result of excess stock of DS games, which had to be disposed of or
written down, in a highly competitive environment marked by a high level of piracy.
The gross margin was also negatively impacted by the limited number of launches for the consoles Xbox
360™ and PlayStation®3 and for PC, with stronger margins, particularly as the gross margin of games for the
Xbox 360™and PlayStation®3 improved compared with the previous financial year. The gross margin
remained stable for Wii™ games.
The current operating loss before share-based payments amounted to €(59.6) million, higher than the latest
target of around €(50) million. The gap is essentially due to additional write-downs on games launched
during the financial year 2009/2010 and in the future.
Current operating income breaks down as follows:
Drop of €126.7 million in the gross margin.
Increase of €63.1 million in research and development costs, which represent 35.5 % of sales
(€309.4 million), compared with 23.3 % in 2008/2009 (€246.3 million). This increase is mainly due to
accelerated and advance depreciation, which had been announced previously and amounted to
almost €60 million over the financial year.
Stabilization of SG&A expenses in terms of value (€263.0 million compared with €264.4 million) and
an increase as a percentage of sales to 30.2 % compared with 25.0 % in 2008/2009:
− An increase in variable marketing expenses to 16.5 % of sales (€143.6 million), compared with
14.4 % (€153.3 million) in 2008/2009.
− An increase in structural costs to 13.7 % of sales (€119.4 million), compared with 10.5 % (€111.1
million) in 2008/2009.
The operating loss amounts to €(72.1) million, compared with operating income of €113.5 million in
2008/2009. In particular, it includes share-based payments of €12.1 million (€16.9 million in 2008/2009).
Financial income amounted to €4.7 million (compared with a financial loss of €4.8 million in 2008/2009) and
can largely be broken down as follows:
€0.5 million in financial expenses, compared with income of €0.3 million in 2008/2009.
€5.2 million in foreign exchange income, compared with a loss of €5.3 million in 2008/2009.
The net loss amounted to €(43.7) million, corresponding to a net loss per share (diluted)1 of €(0.45),
compared with net income of €68.8 million and €0.71 in 2008/2009.
Excluding non-recurring items and before share-based payments, the net loss amounted to €(31.6) million,
corresponding to a net loss per share (diluted)3 of €(0.33), compared with net income of €84.7 million in
2008/2009 or €0.87 per share.
1.1.2.7 Change in the working capital requirement and debt levels
The working capital requirement rose by €33.4 million after falling by €1.7 million the previous year. The
main changes, with regard to WCR increases, relate to balance sheet items linked to Taxes or (€+74.5
million), other assets (€+17.1 million, including €13.9 million for the grants receivable item) and, with regard
to reductions, the items for Inventory (€-12.1 million), Trade payables (€-14.9 million) and other liabilities (€-
39.4 million). The strong increase in the working capital requirement relating to tax items is mainly linked to
credits linked to the losses booked during the year (€23 million) and to advances on taxes (€13 million); the
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1 Following a two-for-one stock split on November 14, 2008