Ubisoft red lantern of the SBF 120: warning from Take-Two and placement of shares

(AOF) – Ubisoft (-3.76% to 26.64 euros) is confined to last place in the SBF 120 index. The video game publisher is weakened by the warning from its competitor Take-Two and the placement of 3.1 million shares related to the placement of OCEANEs maturing in 2028. 470 million euros of bonds convertible into and/or exchangeable for new or existing shares were thus placed.

The net proceeds from the issue will finance the general needs of the video game publisher, and in particular will allow it to increase financial flexibility and refinance existing debt.

Tencent, which recently announced that it directly holds a stake of approximately 5.5% of the company’s share capital, subscribed to the issue for an amount of 23.5 million euros, representing 5% of the nominal amount of the issue. ’emission.

The bond conversion/exchange price was set at €39.4563, corresponding to a premium of 47.5% above the reference price.

The reference price is 26.75 euros and corresponds to the price per share set within the framework of the simultaneous accelerated placement of shares, organized to facilitate the constitution by certain subscribers of the bonds of a hedge of their exposure to the underlying shares. to said obligations.

Under the concurrent share offering, approximately 3.1 million shares were allotted, including 929,000 shares to Tencent. The expected date for the settlement-delivery of the simultaneous placement of shares is November 10, 2022.

Last night, its competitor Take Two Interactive Software reduced its annual results targets. For the current fiscal year, ending at the end of March, adjusted earnings per share are expected between $3.85 and $4.10 compared with a previous target range of $4.6 to $4.85. The consensus stands at 4.82 dollars.

In addition, Take Two is now targeting adjusted sales of between 5.4 and 5.5 billion dollars against 5.8 and 5.9 billion dollars previously. The market is targeting $5.91 billion.

“Our reduced guidance reflects the evolution of our project portfolio, currency fluctuations and a more cautious view of the current macroeconomic environment, particularly in the mobile sector,” explained CEO Strauss Zelnick during a press conference with analysts.

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Key points

– The world’s third largest independent video game publisher created in 1986, holding the flagship brands Assassin’s Creed, Just Dance, Watch Dogs, The Division, Far Cry, For Honor, Tom Clancy, the Crew, Ghost Recon, Rainbow 6, Brawlhalla, etc.;

– Turnover of €2.1 billion split between North America for 51%, Europe for 30% and the rest of the world;

– 5 strengths for the business model: ownership of all the brands, integration of technological innovations in the R&D policy, control of internal production at 96%, then ramp-up of recurring revenues (64% provided by the “back catalogue”) and profitability via digitization;

– Presidency and general management of the 11-member board ensured by Yves Guillemot.

Challenges

– Strategic priorities:

– simplification of the organization, with global and no longer regional publishing,

– focus on the most ambitious opportunities – first Assassin’s Creed then Rainbow Six and the Division, with a target of €2 billion in revenue in 2027,

– portfolio strategy provided by the Global Creative Office;

– Innovation strategy:

– “Lead associate” for the 45 creative studios,

– advanced technologies (Anvil and Snowdrop for engines, Ubisoft connect and I3D.net for distribution), Web3, Voxel and cloud computing with Scalar, etc.,

– Motion Pictures for animation and feature films,

– support for start-ups: 6 to 10 incubated each year;

– Environmental strategy driven by the BEGES report:

– use of renewable energies for French and Canadian data centers,

– sequestration of GHG emissions and reduction of emissions per employee of 8.8% in March 2024 vs 2019;

– Spin-offs from the integration of Ketchapp, some games of which are integrated into Chinese Tencent’s Weixin laptop and development of a new Starwars game with Lucasfilm Game;

– Rapid rise of mobile in net booking (27%), which equals the annual turnover.

Challenges

– Seasonality of activity centered on September-January, hence the closure of accounts at the end of March;

– Strengthening of capital ties with Tencent with an option to increase its direct stake in Ubisoft to 9.99%;

– Cost optimization plan:

– at the end of 2022-23 stabilization of the workforce at the level of the end of 2021-22,

– during 2023-24: return of structural costs to the level of 2021-22 and maintenance of R&D at the level of 2022-23, the last year of significant growth;

– After a drop in sales and an operating loss in the 1st half, the 2022-2023 objective of significantly growing net booking and operating profit almost doubled to around €400 million.

Series of acquisitions

At the beginning of 2022, Microsoft acquired the American publisher Activision Blizzard (franchises “Call of Duty”, “World of Warcraft” and “Candy Crush”) for 69 billion dollars. This is the largest M&A transaction ever in tech. Following this operation, Microsoft will become the third largest player in the industry in terms of turnover behind the Chinese Tencent and the Japanese Sony. The latter recently acquired Bungie, creator of the “Halo” franchise, for $3.6 billion. As for the American publisher Take-Two (behind the flagship titles “Grand Theft Auto” and “Red Dead Redemption”), it has taken over Zynga, one of the biggest players in mobile video games with franchises such as “Farmville”, “Empires & Puzzles” and “Words With Friends”. The operation was made on the basis of a valuation of 12.7 billion dollars.