Ubisoft Posts Yearly Sales Increase, Profit Decline

French-headquartered Ubisoft, one of the largest publishers in video games, has posted its results for the fiscal March 31, 2006, indicating a slight increase in sales, but an overall decline in annual profits. The company's net sales for the year climbed 3 percent to €547.1 million ($688.6 million), up from the previous year's €532.5 ($670.3 million). However, net income for the fiscal year was €11.9 million ($15 million), down from €24.7 million ($31.1 million) reported a year earlier, and operating income was just €0.4 million ($0.5 million), compared to €33.5 million ($42.1 million) in 2004-2005. The company blamed the decline in profits on a “temporary rise in marketing expenses”, which Ubisoft pointed out as a necessary expense in light of the console transition period. In addition, the company also increased R&D spending by €12.8 million ($16.1 million), citing a need to “take full advantage of the substantial growth expected from the new consoles market.” The company also reported a €18.4 million ($23.1 million) rise in advertising expenses, which it said was chiefly focused on marketing of current generation titles. However, despite this expense, Ubisoft conceded that sales of current generation software for the company “declined more rapidly than anticipated.” Despite this, however, Ubisoft CEO Yves Guillemot noted that he feels that his company's performance was “solid” during the fiscal year, noting that the publisher and developer gained new market share and increased its overall sales "in spite of the 3 percent decline in the video game sector." Guillemot added: “Thanks to our R&D efforts and our early positioning on new generation consoles, we have already achieved almost 30% of our sales from next generation in fiscal year 2005-2006 and in the fourth quarter, we attained 20% of market share on the Xbox 360. 2005-2006 was also marked by the success of the game Peter Jackson’s King-Kong: The official Game of the Movie, which enabled us to jump into the film licensing market with 4.5 million units sold. Finally, during this period of high investment, Ubisoft has continued to improve its financial position and can therefore accelerate its growth and pursue its development.” Looking forward, Guillemot highlighted the fact that the coming fiscal year will be “a new year of transition” with the launch of the PlayStation 3 and the Wii. “We forecast a sales growth of between 5% and 10%, despite a global market which should decrease by 7%, thanks to the launch of 5 new high-potential brands.” New franchises set to launch within the window include Assassin's Creed (PS3), Red Steel (Wii exclusive), and Heroes of Might and Magic (PC, already released). Guillemot also added that Ubisoft's sales objective for the first quarter of 2006-2007 is approximately €60 million ($75.5 million). Guillemot concluded: "We will pursue our offensive strategy of investment in new consoles in order to continue to grow faster than the market thanks to the creation of new brands and to our entry into new games segments. We will thus be able to take full advantage of the strong upturn in the sector predicted for 2007-2008 onwards".