Ubisoft 2014 Annual Report Download - page 57

Management Report
2014
52
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 such as license
agreements and intercompany invoicing are denominated in another currency. The operating
margin of the subsidiaries concerned may therefore be exposed to fluctuations in exchange
rates involving their operational currency.
 Through its financing activities: in line with 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 currency 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 Group first uses natural hedges provided by transactions in the other direction (development costs
in foreign currency offset by royalties from subsidiaries in the same currency). The parent company
uses foreign currency borrowings, forward sales or foreign-exchange options to hedge any residual
exposures and non-commercial transactions (such as intercompany loans in foreign currencies).
The sensitivity of Group earnings to changes in the value of its main currencies is described in Note 14
to the consolidated financial statements.
Impact of a (+/-1%) variation in the main currencies on sales and operating income/loss
Currency
Impact on sales
(1)
Impact on operating income/loss
(1)
USD
4,368
1,444
GBP
999
560
CAD
814
(1,141)
1)
In thousands of euros for the financial year 2013/2014
Impact of a (+/-1%) variation in the main currencies on goodwill and brands
Currency
Impact on shareholders’ equity
(1)
USD
601
GBP
113
CAD
70
(1)
In thousands of euros
FINANCING AND LIQUIDITY RISK
In the course of its operating activities, the Group has no recurrent or significant debts. Operating cash
flows are generally sufficient to finance operating activities and organic growth. However, the Group
issued bonds and implemented a commercial paper program as part of the diversification of its finance
sources and may need to increase its debt by using credit lines to finance merger and acquisition
activities. In order to finance temporary needs related to increases in working capital during especially