Ubisoft Had A Tough Summer

Ubisoft have just released their financial results for the six months to the end of September, which forms the first half of their 2009-10 financial year.  Compared to the company’s performance in the same period of their FY 2008-09 it makes for some sombre reading.

Ubisoft’s sales suffered a “sharp drop” during the period, falling by over 50% from €344.5m (£313m) to €166m (£151m).  Unsurprisingly, as a result gross profit also fell from €199.6m (£181.6m) to €69.1m (£62.8m).  Not only is that a fall in what financial people call “absolute value terms” (comparing € to € over the same period) but also a fall in gross profit as a percentage of sales from 57.9% to 41.6%.

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This fall in gross profit perhaps gives us some indication of how hard publishers are working to keep unit sales up.  During the period Ubisoft have been conducting “significant sales promotions” on their back-catalogue titles.  This means that despite achieving increased gross profit on games they released during those six months, sales of their back-catalogue titles were made at a negative gross margin when they would normally be expected to generate a gross profit.  In simple terms, sales of older titles have been costing Ubisoft money rather than making it!

The bottom line for Ubisoft during those six months is that they made an operating loss of €83m (£75.5m) compared to and operating income of €24.7m (£22.4m) in the same period last year.  Recently they also released their sales figures for the first half year and perhaps the fact that the headline title in that report was Call of Juarez: Bound in Blood with its 900,000 sales indicates that a lack of big titles releases has contributed.

What for many companies is the third quarter, October to December, has long been referred to as the Golden Quarter as understandably the run up to Christmas is when most of their sales are made.  Ubisoft has a sales target for its Golden Quarter of around €540m (£491.4m) dependent largely upon the performance of Assassin’s Creed II and this week’s release of James Cameron’s Avatar: The Game.

They are targeting sales of €1,040m (£946.4m) for their full financial year, which if you subtract their first half and projected third quarter sales leaves a target of €334 (£304m) for their fourth quarter.  With a very good looking AAA title in the Xbox 360 exclusive Tom Clancy’s Splinter Cell Conviction, the ever-slipping I Am Alive and a new multi-platform RTS called R.U.S.E. all currently due in the first three months of 2010 (though March in particular is looking extremely crowded/expensive for gamers) if they can stop losing money on back-catalogue sales they should have a reasonable strong start to 2010.

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