(News Bulletin 247) – Defying predictions, the video game publisher achieved its non-IFRS operating profit objective for its fiscal year. But its outlook for the current financial year clearly disappoints investors.

Against all expectations, Ubisoft completes the level. The video game publisher unveiled its annual accounts for the 2023-2024 financial year on Wednesday evening, which ended last March. Analysts had noted that the group would not meet its main objective, namely a non-IFRS operating profit of 400 million euros. Invest Securities cites a consensus at 371 million euros, Oddo BHF cites another at 375 million euros.

Ultimately, this non-IFRS operating profit stood at 401.4 million euros, well exceeding expectations.

And, yet, Ubisoft was violently sanctioned on the stock market this Thursday, with the stock plunging 15.2% around 10:30 a.m.

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Disappointment on the operating profit target

The cause of this punishment is to be found in the group’s prospects for the 2024-2025 financial year, ending next March. The company indicated that it anticipated “solid growth” in its “net bookings”, that is to say the turnover restated for certain deferred income, but only a “slight increase” in its non-IFRS operating profit.

However, according to Oddo BHF, the consensus anticipated before this publication, a non-IFRS operating profit of 459 million euros, which would reflect growth of 14.4% in this indicator. Backwards, therefore, from the “slight progression” promised by Ubisoft.

“There is clearly disappointment with the operating profit objective which is far from the consensus of 459 million euros. The 2023-2024 financial year was driven by very well-margined licensing revenues, with the Activision license ( for streaming, Editor’s note) or the licenses that Ubisoft itself grants to companies to develop mobile games. We do not know the exact weight of these licensing revenues, but we can assume that they were significant. and will not be recurring. They will therefore contribute less to the margin for the 2024-2025 financial year,” explains a Parisian analyst.

“The higher contribution from new games, the continued growth of Rainbow Six Siege and further fixed cost reductions will be partially offset (for the 2024-2025 financial year) in profits by a lower contribution from B2B partnerships with high margins”, also notes, for its part, Oddo BHF.

“Moreover, as we got closer to the publication, the stock rose and the market began to anticipate, in the absence of profit warnings, that there would be no bad surprise”, adds the Parisian analyst previously cited.

For this 2024-2025 financial year, Ubisoft will be able to count on the launch of two “AAA” games, that is to say video game blockbusters. These will be “Star Wars Outlaws”, which looks like a GTA in the Star Wars universe and whose first images have received a good reception from the press, as well as “Assassin’s Creed Shadows”, new opus of the Assassin’s Creed license which will take place in the era of feudal Japan. The promises displayed by these two titles had also led Stfiel to purchase from Ubisoft last week.

Cash burned

Returning to the video game publisher’s annual results, the company generated net bookings of 2.32 billion euros over the entire financial year, up 33.5% over one year. In the fourth quarter alone, net bookings were multiplied by almost three to 872.7 million euros, driven by the release of several games over the period (such as Prince of Persia: The Lost Crown). Both over the year and the fourth quarter, Ubisoft recorded record net bookings.

Non-IFRS operating profit therefore reached 401.4 million euros compared to a loss of 500.2 million euros in 2022-2023. In addition to the growth in activity, this line of accounts benefited from the company’s savings measures, which reduced its fixed cost base by approximately 150 million euros in 2023-2024 and intends to achieve a figure of 200 million euros in 2025-2026.

Ubisoft’s net profit also returned to the green, at 157.9 million euros, compared to a loss of 495 million euros over the previous financial year.

Oddo BHF nevertheless says it is “disappointed” with the consumption of cash, Ubisoft having disbursed 509.4 million euros in cash over the financial year, which marks the third consecutive year in the red. The broker notes that this cash consumption is due to a sharp deterioration in working capital requirements, itself caused by significant trade receivables following the record turnover of the fourth quarter.

“Ubisoft confirms its recovery in results” with the 2023-2024 financial year, “but reading the accounts is still complicated (significant contribution from infrequent partnerships, high cash consumption, etc.)”, judges Oddo BHF. “The commitments made by management for the next financial year 2024-2025 also encourage us to revise our forecasts downwards (-7% for earnings per share),” continues the broker.

UBS, for its part, confirmed its “sell” opinion on the stock. The Swiss bank estimates that Ubisoft will only generate, cumulatively, 112 million euros in cash by the end of the 2028-2029 financial year. This while the company will have to repay 1.4 billion euros of loans between 2024-2025 and 2027-2028. “Therefore, we believe the stock will remain under pressure unless the group manages to generate free cash flow above expectations,” concludes UBS.