(News Bulletin 247) – The video game publisher generated sales significantly above expectations in the first half. The objectives for the entire exercise are confirmed.

“Ahead of the game”. This is how Deutsche Bank titled its note of the day following the (good) publication from Ubisoft.

The video game publisher is operating on a narrow crest line over the current financial year, with several “AAA” releases – video game blockbusters – in a few months. After the arrival of Assassin’s Creed Mirage at the beginning of October, the game Avatar: Frontiers of Pandora based on the Avatar film franchise will arrive in December, followed in January by the new Prince of Persia, then by Skull and Bones, Ubisoft having announced Thursday evening that The release of this pirate game was now planned between January and March of next year.

This catalog of releases is double-edged because it could certainly allow the publisher to sign its best year in terms of sales (according to UBS which expects 30 million game units sold).

But all this will depend on good reception from the public, while increased competition from other publishers this year and the deterioration of macroeconomic conditions risk pushing gamers to be selective in their choices.

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The back catalog impresses

For now, everything is going well for Ubisoft, which has delivered its results for the first half of the 2023-2024 fiscal year. Morgan Stanley also believes that this publication contains “plenty of positive elements”.

Turnover increased by almost 16.7% excluding currency effects to 836 million euros while its main revenue indicator, “net bookings”, i.e. turnover restated for certain deferred revenues, increased increased by more than 20% on these same bases, reaching a record level according to the company.

In the second quarter alone, net bookings increased by more than 40% excluding currency effects to 554.8 million euros. Morgan Stanley notes that this last figure turns out to be around 60% higher than the consensus, which stood at 355 million euros.

This good performance is largely due to the “back-catalogue”, that is to say the revenues from games already released (sales of games strictly speaking but also of additional content such as DLC), Ubisoft evoking “an outperformance “. “Impressive performance of the back-catalogue”, underlines Oddo BHF.

The group indicates that it has “monetized” games already released “through partnerships” and highlighted the good performance of Rainbow Six Siege, with net booking up 50% year-on-year in the first half.

Cost reductions are moving forward

“This result also reflects the record launch of The Crew Motorfest (a racing game, Editor’s note) and higher pre-deliveries for Assassin’s Creed Mirage,” adds the company. Regarding the reception of the latest installment in the Assassin’s Creed saga, Ubisoft reiterated that the number of players online during the first week of the game’s release was “comparable” with Assassin’s Creed Origins and Assassin’s Creed Odyssey.

On other account lines, operating profit reached 16.1 million euros in the first half compared to a loss of 215 million euros a year earlier. The net loss stood at 34.4 million euros compared to a loss of 190 million euros in the first half of the previous financial year.

In terms of prospects, the group indicated that it expected net bookings of 610 million euros for the current quarter and confirmed its objectives for its entire financial year, namely “strong growth” in net bookings and a result of non-IFRS operations of approximately 400 million euros. “This, without releasing the other major game that (the company) had initially planned to launch during the fourth quarter of the current financial year,” adds Ubisoft, which did not mention the name of the game in question.

Regarding non-results announcements, Ubisoft indicated that it was “on track” with its cost reduction plan, the objective of which is 200 million euros in full-year savings made by the end of its financial year. 2024-2025. The company’s fixed costs were reduced by 65 million euros in the first half, which Morgan Stanley considers “encouraging”.

Better visibility

According to the bank, the company’s management did not give any information on the price paid to recover the cloud streaming rights from the Activision-Blizzard licenses, except that it was less than 50 million euros.

The market appreciates all of these announcements, with Ubisoft shares gaining 4.6% around 3:55 p.m. to 27.13 euros, after having even gained more than 12.7% at the start of the morning.

“These excellent elements confirm our confidence in the group and its potential for short-term appreciation,” concludes TP ICAP Midcap.

“This publication improves visibility on the file, allowing us to raise our price target to 30 euros compared to 27 euros previously,” underlines Oddo BHF.

“We see a big opportunity for Ubisoft as it attempts to pivot its business towards a higher quality business mix and implements potentially attractive cost reduction. But the recent track record strategy, Editor’s note) is weak and the market is very competitive, which encourages us to stay on the sidelines for the moment and we give the action an “Equal-weight” rating (online weighting)”, explains his Morgan Stanley side.