Business Valuation Case
1
ACTG 495
Case 5 – Business Valuation
The following case will utilize your 5 year forecast of Ubisoft Entertainment SAs (Ubisoft or the
Group) financial statements to value the business. This case involves a discounted cash flow
approach to value Ubisoft at a total company level as well as a value per share of common stock.
Companies will maintain valuation models to ensure proposed strategies improve value, evaluate
acquisitions and divestitures, sale or repurchase of financial securities, etc.
Requirements
Part I Weighted Average Cost of Capital (WACC)
Under the Discounted Cash Flow method, the value of a business is the present value of all future
Free Cash Flow. The discount rate applied to the future Free Cash Flow is the WACC. This is the
weighted average return that equity and debt investors expect based on the risk of the business.
A. Calculate the weights (mix) of debt and equity the company is utilizing as of March 31, 2020
(2020). The weights can be estimated by using the current market values. For example,
the weight of equity would be the value of equity divided by the sum of value of equity plus
the value of debt. To calculate the value of equity use the total number of shares outstanding
multiplied by the current market price per share. To calculate the value of debt, add the value
of short term financial debt plus the value of long term financial debt from the 2020 balance
sheet.
B. Calculate the cost of equity based on the Capital Asset Pricing Model (CAPM). Estimates for
Risk Free Rate and Market Risk Premium (MRP) and provided in the assumptions section at
the end of the case. (You will need to calculate the (beta) for Ubisoft based on comparable
U.S. companies – see PowerPoint slides for formulas.)
C. Calculate the after tax cost of debt. To arrive at a cost of debt for the company use the rate
of return debt investors are currently expecting from the company and then multiply by (1
tax rate). Many companies which utilize debt as a source of financing have multiple debt
securities outstanding with each having a different interest rate based on varying maturities or
provisions in each debt agreement.
D. Calculate the WACC based on the estimated rates of return on debt and equity and weights
calculated above.
Part II Free Cash Flow (FCF)
A. Based upon your 5 year forecast of Ubisofts financial statements, calculate FCF for each year
of the forecast period. Feel free to revise your forecast from the prior case as needed.
B. Ubisoft is a strong company and will likely continue to operate and generate FCF after the
forecast period. Analysts typically capture the value after the forecast period in a Terminal
Value calculation (also called horizon value or continuing value). Please calculate the terminal
value for Ubisoft.
Part III Valuation
With estimates in place for WACC and future FCF, you are now able to calculate a discounted cash
flow based valuation for Ubisoft.
2
A. Based on your estimates, what is the total value of Ubisoft? The total value of the firm would
be the present value of all future FCF plus the current value (2020) of any non-operating
assets not included in the forecast. Non-operating assets are typically financial in nature,
such as cash & equivalents, marketable securities, and short and long term investments.
B. What is the estimated value of equity?
C. What is the estimated value per share of common stock?
Part IV Sensitivity Analysis
The estimated value of Ubisoft is based on many assumptions related to the future performance
of the business and investor return expectations. Analysts spend a lot of time trying to put an
accurate forecasts in place, but the probability of every single input being accurate is virtually
zero. Sensitivity is a form of risk analysis to help identify which forecast assumptions are most
material and how changes to these assumptions impact the valuation.
Perform a sensitivity analysis on the following variables:
Growth rate of sales
Operating margin
Operating cycle
Choose 1 2 other variables
Part V Recommendation: Market value vs. calculated value
Compare your estimate of per share value of common stock to Ubisofts current market price.
Is your estimate higher or lower than the market price? What factors are likely
contributing to the difference?
If you were an equity analyst, would you recommend a Buy, Hold or Sell on Ubisoft stock
and why?
Assumptions:
Yield to Maturity (YTM) on 10 year French government bond (risk free rate): 0.67%
Market risk premium for France: 5.65%
Ubisofts stock price 70.04 per share Data
for the Years Ended March 31,
Consolidated Income Statements
For the Years Ended March 31,
(In thousands of euros)
2020 2019 2018 2017 2016 2015
Sales 1,594,831 1,845,522 1,731,894 1,459,874 1,393,997 -4.8% 1,463,753
Cost of sales (253,077) -15.9% (328,972) -17.8% (296,820) -17.1% (270,887) -18.6% (305,065) -21.9% (337,073)
Gross profit 1,341,754 1,516,550 1,435,074 1,188,987 1,088,932 1,126,680
R&D expenses (720,829) -45.198% (740,969) -40.150% (690,592) -39.875% (548,735) -37.588% (509,779) -36.570% (580,554)
Marketing expenses (386,604) -24.241% (410,070) -22.220% (339,274) -19.590% (316,806) -21.701% (305,735) -21.932% (284,965)
Administrative and IT expenses (193,011) -12.102% (157,295) -8.523% (144,649) -8.352% (122,538) -8.394% (117,296) -8.414% (100,051)
Operating income from continuing operations 41,310 -27.2% 208,216 -23.6% 260,559 -22.6% 200,908 -22.6% 156,122 -22.3% 161,110
Other non-current operating income and expenses (100,806) (49,231) (38,242) (25,094) (19,334) (21,717)
Operating income (59,496) 158,985 222,317 175,814 136,788 139,393
Interest on borrowings (18,121) -1.136% (20,920) -1.134% (17,732) -1.0% (12,081) -0.8% (8,429) -0.60% (5,322)
Income from cash 4,189 0.4% 2,780 0.3% 1,823 0.2% 1,265 0.1% 989 0.2% 556
Net borrowing cost (13,932) (18,140) (15,909) (10,816) (7,440) (4,766)
Result from foreign-exchange operations (3,787) (5,311) (5,747) (2,288) (5,168) 1,159
Other financial expenses (1,474) (23,941) (56) (5,449) (3,666) (1,764)
Other financial income 132 36,515 8,312 2,348 2,548 6,083
Net financial income (19,061) (10,877) (13,400) (16,205) (13,726) 712
Share in profit of associates 0 294 (224) (339) 0 0
Total income tax (45,685) (48,417) (69,241) (51,457) (29,654) (53,094)
Consolidated net income (124,242) 99,985 139,452 107,813 93,408 87,011
Net income attributable to non-controlling interests 1,382 0 0 0 0 0
Net income attributable to owners of the parent company (125,624) 99,985 139,452 107,813 93,408 87,011
Ubisoft Entertainment SA and Subsidiaries
Consolidated Balance Sheets
March 31,
(In thousands of euros)
2020 2019 2018 2017 2016 2015
ASSETS
Goodwill 334,558 15.1% 290,721 12.0% 259,462 43.6% 180,735 70.2% 106,194 -18.3% 129,906
Other intangible assets 1,115,283 26.3% 882,925 12.8% 782,402 6.2% 736,465 13.7% 647,602 13.2% 572,225
Property, plant and equipment 174,393 9.0% 159,958 40.2% 114,116 7.3% 106,375 26.7% 83,946 80,983
Right-of-use assets 229,906 0 0 0 0 0
Investments in associates 7 7 (289) (69) 0 0
Non-current financial assets 13,710 8,660 106,895 5,478 4,339 4,162
Deferred tax assets 169,338 168,443 84,181 88,831 122,193 134,954
Non-current assets 2,037,195 1,510,714 1,346,767 1,117,815 964,274 922,230
Inventory 12,446 -61.0% 31,880 57.3% 20,264 -20.1% 25,359 30.9% 19,374 5.2% 18,425
Trade receivables 307,060 -35.6% 476,641 9.4% 435,573 7.4% 405,557 -3.3% 419,577 1655.3% 23,904
Other receivables 127,456 -29.2% 179,982 -13.8% 208,778 42.5% 146,467 45.0% 100,985 -11.3% 113,855
Current financial assets 453 146.2% 184 -97.8% 8,320 635.6% 1,131 -91.8% 13,780 180.1% 4,919
Current tax assets 41,034 3.7% 39,555 2.8% 38,481 16.7% 32,967 -20.5% 41,464 234.9% 12,380
Cash and cash equivalents 1,079,197 2.8% 1,049,803 40.5% 746,939 -12.4% 852,699 84.8% 461,375 -29.7% 656,661
Current assets 1,567,646 1,778,045 1,458,355 1,464,180 1,056,555 830,144
Total assets 3,604,841 3,288,759 2,805,122 2,581,995 2,020,829 1,752,374
LIABILITIES AND EQUITY
Share capital 9,374 8,650 8,652 8,752 8,710 8,478
Premiums 863,547 335,759 234,123 280,975 215,125 180,515
Consolidated reserves 567,256 475,624 507,102 736,276 701,267 703,378
Consolidated earnings (125,624) 99,985 139,453 107,813 93,408 87,011
Equity attributable to owners of the parent company 1,314,553 920,018 889,330 1,133,816 1,018,510 979,382
Non-controlling interests 7,190 0 0 0 0 0
Total equity 1,321,743 920,018 889,330 1,133,816 1,018,510 979,382
Provisions 3,091 2,469 3,074 4,246 8,888 7,497
Employee benefit liabilities 15,769 14,382 10,289 9,079 6,618 5,430
Long-term borrowings and other financial liabilities 1,176,198 890,366 933,629 640,705 277,383 275,739
Deferred tax liabilities 109,531 127,902 96,047 72,773 47,648 48,944
Other non-current liabilities 59,568 0 0 0 0 0
Non-current liabilities 1,364,157 1,035,119 1,043,039 726,803 340,537 337,610
Short-term borrowings and other financial liabilities 246,863 453,299 361,538 293,403 228,218 183,226
Trade payables 139,208 188,787 176,613 178,283 206,246 94,919
Other liabilities (includes deferred revenue) 517,730 664,618 321,935 219,818 213,807 149,614
Current tax liabilities 15,140 26,918 12,667 29,872 13,511 7,623
Current liabilities 918,941 1,333,622 872,753 721,376 661,782 435,382
Total liabilities and equity 3,604,841 3,288,759 2,805,122 2,581,995 2,020,829 1,752,374 0
Ubisoft Entertainment SA and Subsidiaries
Consolidated Cash Flow Statements
For the Years Ended March 31,
(In thousands of euros)
2020 2019 2018 2017 2016 2015
Cash flows from operating activities
Consolidated earnings (124,242) 99,985 139,452 107,813 93,408 87,011
Share in profit of associates 0 (294) 224 338 0 0
Net amortization and depreciation on PP&E 619,429 584,259 544,031 474,635 462,800 510,963
Net provisions 2,264 22,039 4,052 (2,563) 449 3,201
Cost of stock-based-compensation 53,772 54,686 39,558 36,836 12,918 9,609
Gains/losses on disposals 682 261 308 408 104 64
Other income and expenses calculated 10,650 (5,403) 8,578 (10,655) 24,335 (15,534)
Tax expense 45,685 48,418 69,241 51,457 29,654 53,094
Cash flows from operating activities 608,240 803,951 805,444 658,269 623,668 648,408
Inventory 20,186 (31,326) 229 (5,381) (11) 3,007
Customers (trade receivables) 182,891 (18,031) (61,544) 31,934 (402,877) 53,783 Operating cycle
Other assets (excluding deferred tax assets) 58,194 105% 28,408 -135% (81,048) -570% 17,240 -156% (30,588) (23,503) 2,020 2,019 2,018 2,017 2,016 2,015
Suppliers (trade payables) (49,199) 3,181 15,243 (45,082) 116,466 (5,292) (18) (35) (25) (34) (23) (20)
Other liabilities (excluding deferred tax liabilities) (51,805) 6,389 49,380 24,871 61,635 34,034 38 63 65 60 45 39
Deferred income and prepaid expenses (96,525) 248,384 (3,089) 0 0 0
Change in WCR linked to operating activities 63,742 237,005 (80,829) 23,582 (255,375) 62,029 20 28 40 26 22 19
Current tax (71,624) (68,582) (33,460) (36,140) (27,586) (56,362)
Total cash flow generated by (used in) operting activities 600,358 972,374 691,155 645,711 340,707 654,075
Cash flows from investment activities
Payments for internal and external developments (651,202) (587,699) (521,290) (496,588) (489,464) (421,683)
Payments for other intangible assets and PP&E (104,909) (74,402) (59,366) (62,916) (42,499) (56,244)
Proceeds from the disposal of intangible assets and PP&E 179 25 20 603 67 122
Payments for the acquisition of financial assets (215,697) (43,816) (31,493) (44,373) (34,391) (23,709)
Security deposit CACIB 0 100,000 (100,000) 0 0 0
Refund of loans and other financial assets 210,498 42,057 29,790 43,322 34,115 23,373
Changes in scope (143,735) (84,327) (77,589) (105,642) 358 (3,188)
Cash generated by (used in) investing activities (904,866) (648,162) (759,928) (665,594) (531,814) (481,329)
Cash flow from financing activities
New finance leases contracted 0 20 5,054 1,416 0 10,142
New borrowings 935,241 604,985 893,596 669,165 234,540 622,185
Accrued interest (25) (1,324) 1,002 (18) 14 87
Refund of borrowings in relation to leases (35,577) (1,300) (1,672) (898) (891) (291)
Repayment of borrowings (584,908) (572,177) (487,677) (214,663) (230,216) (466,578)
Funds received from shareholders in capital increases 81,466 131,910 48,951 9,465 21,924 18,054
Sales/purchases of own shares 35,348 (201,899) (411,498) (67,844) (77,272) 650
Associated current accounts 0 0 0 0 258 (260)
Cash generated by (used in) financing activities 431,545 (39,785) 47,756 396,623 (51,643) 183,989
Net change in cash and cash equivalents 127,037 284,427 (21,017) 376,740 (242,750) 356,735
Cash and cash equivalents at the beginning of the period 878,612 583,354 632,314 255,688 505,215 115,610
Foreign exchange losses/gains (18,722) 10,831 (27,943) (114) (6,777) 32,870
Cash and cash equivalents at the end of the period 986,927 878,612 583,354 632,314 255,688 505,215
Vertical
2020 2019 2018 2017 2016 2015
Sales 100% 100% 100% 100% 100% 100%
Cost of sales -15.87% -17.83% -17.14% -18.56% -21.88% -23.03%
Gross profit 84.13% 82.17% 82.86% 81.44% 78.12% 76.97%
R&D expenses -45.20% -40.15% -39.87% -37.59% -36.57% -39.66%
Marketing expenses -24.24% -22.22% -19.59% -21.70% -21.93% -19.47%
Administrative and IT expenses -12.10% -8.52% -8.35% -8.39% -8.41% -6.84%
Operating income from continuing operations 2.59% 11.28% 15.04% 13.76% 11.20% 11.01%
Other non-current operating income and expenses -6.32% -2.67% -2.21% -1.72% -1.39% -1.48%
Operating income -3.73% 8.61% 12.84% 12.04% 9.81% 9.52%
Interest on borrowings -1.14% -1.13% -1.02% -0.83% -0.60% -0.36%
Income from cash 0.26% 0.15% 0.11% 0.09% 0.07% 0.04%
Net borrowing cost -0.87% -0.98% -0.92% -0.74% -0.53% -0.33%
Result from foreign-exchange operations -0.24% -0.29% -0.33% -0.16% -0.37% 0.08%
Other financial expenses -0.09% -1.30% -0.00% -0.37% -0.26% -0.12%
Other financial income 0.01% 1.98% 0.48% 0.16% 0.18% 0.42%
Net financial income -1.20% -0.59% -0.77% -1.11% -0.98% 0.05%
Share in profit of associates 0.00% 0.02% -0.01% -0.02% 0.00% 0.00%
Total income tax -2.86% -2.62% -4.00% -3.52% -2.13% -3.63%
Consolidated net income -7.79% 5.42% 8.05% 7.39% 6.70% 5.94%
Net income attributable to non-controlling interests 0.09% 0.00% 0.00% 0.00% 0.00% 0.00%
Net income attributable to owners of the parent company -7.88% 5.42% 8.05% 7.39% 6.70% 5.94%
2020 2019 2018 2017 2016 2015
Sales -13.6% 6.6% 18.6% 4.7% -4.8%
Cost of sales -23.1% 10.8% 9.6% -11.2% -9.5%
Gross profit -11.5% 5.7% 20.7% 9.2% -3.4%
R&D expenses -2.7% 7.3% 25.9% 7.6% -12.2%
Marketing expenses -5.7% 20.9% 7.1% 3.6% 7.3%
Administrative and IT expenses 22.7% 8.7% 18.0% 4.5% 17.2%
Operating income from continuing operations -80.2% -20.1% 29.7% 28.7% -3.1%
Other non-current operating income and expenses 104.8% 28.7% 52.4% 29.8% -11.0%
Operating income -137.4% -28.5% 26.5% 28.5% -1.9%
Interest on borrowings -13.4% 18.0% 46.8% 43.3% 58.4%
Income from cash 50.7% 52.5% 44.1% 27.9% 77.9%
Net borrowing cost -23.2% 14.0% 47.1% 45.4% 56.1%
Result from foreign-exchange operations -28.7% -7.6% 151.2% -55.7% -545.9%
Other financial expenses -93.8% 42651.8% -99.0% 48.6% 107.8%
Other financial income -99.6% 339.3% 254.0% -7.8% -58.1%
Net financial income 75.2% -18.8% -17.3% 18.1% -2027.8%
Share in profit of associates -100.0% -231.3% -33.9% – –
Total income tax -5.6% -30.1% 34.6% 73.5% -44.1%
Consolidated net income -224.3% -28.3% 29.3% 15.4% 7.4%
Net income attributable to non-controlling interests – – – – –
Net income attributable to owners of the parent company -225.6% -28.3% 29.3% 15.4% 7.4%
Profitability: 2020 2019 2018 2017 2016 2015
Gross margin 84.1% 82.2% 82.9% 81.4% 78.1% 77.0%
Operating margin 2.6% 11.3% 15.0% 13.8% 11.2% 11.0%
Net margin -7.9% 5.4% 8.1% 7.4% 6.7% 5.9%
Assets turnover 46.3% 60.6% 64.3% 63.4% 73.9% 83.5%
Return on Assets -3.6% 3.3% 5.2% 4.7% 5.0% 5.0%
&P
Base Assumption
Assumption:
Revenue historical 2016 2017 2018 2019 2020
-4.8% 4.7% 18.6% 6.6% -13.6% Will use this rate to compute projected A/R
Revenue growth 2021 2022 2023 2024 2025
15.0% 9.0% 9.0% 9.0% 9.0%
Expenses histo 2016 2017 2018 2019 2020
COGS -21.9% -18.6% -17.1% -17.8% -15.9% % of sales
SGA 7.3% 3.6% 7.1% 20.9% -5.7% This is the change
Other non-current op. -11.0% 29.8% 52.4% 28.7% 104.8%
Expenses growth 2021 2022 2023 2024 2025
COGS 3.2% 1.9% 1.9% 1.9% 1.9% COGS is 21% of the increase of revenue.Will use this rate to compute projected inventory
SGA 4.5% 2.7% 2.7% 2.7% 2.7%
Other non-current op. 0.0% 0.0% 0.0% 0.0% 0.0% This will not have any incease as there is any acquisitions
Interest borrowing 1.13% 1.13% 1.13% 1.13% 1.13% We assume to have the same rate of sales as the last few years
Tax rate (by year) 2016 2017 2018 2019 2020
Hist. -2.1% -3.5% -4.0% -2.6% -2.9%
2021 2022 2023 2024 2025
grow. 3.0% 3.0% 3.0% 3.0% 3.0% Historically the company had a rate rage of 2-4%, so we are assuming that the company will have a rate of 3% as an average of sales!
Dividends
Operating assets 2016 2017 2018 2019 2020
2021 2022 2023 2024 2025
Operating liability 2016 2017 2018 2019 2020
2021 2022 2023 2024 2025
Debt ratio 2016 2017 2018 2019 2020
2021 2022 2023 2024 2025
Equity 2016 2017 2018 2019 2020
Forecast
for the Years Ended March 31,
Consolidated Income Statements
For the Years Ended March 31,
(In thousands of euros) Actual Forecast
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Sales 1,463,753 1,393,997 1,459,874 1,731,894 1,845,522 1,594,831 1,993,539 2,292,570 2,498,901 2,698,813 2,887,730
Cost of sales (337,073) (305,065) (270,887) (296,820) (328,972) (253,077) (338,902) (389,737) (424,813) (458,798) (490,914)
Gross profit 1,126,680 1,088,932 1,188,987 1,435,074 1,516,550 1,341,754 1,654,637 1,902,833 2,074,088 2,240,015 2,396,816
R&D expenses (580,554) (509,779) (548,735) (690,592) (740,969) (720,829) (777,480) (894,102) (974,571) (1,052,537) (1,126,215) As the company stated that in order for them to develop exceptional video games, they are using the most recent technological advances.This means that Ubisoft will continue spending on R&D as they expected to have a stable level of sales.
Marketing expenses (284,965) (305,735) (316,806) (339,274) (410,070) (386,604) (418,643) (481,440) (524,769) (566,751) (606,423) since the company continued with R&D, they will keep supporting of the Group’s premium games
Administrative and IT expenses (100,051) (117,296) (122,538) (144,649) (157,295) (193,011) (159,483) (183,406) (199,912) (215,905) (231,018)
Operating income from continuing operations 161,110 156,122 200,908 260,559 208,216 41,310 299,031 343,885 374,836 404,822 433,160
Other non-current operating income and expenses (21,717) (19,334) (25,094) (38,242) (49,231) (100,806) 0 0 0 0 0
Operating income 139,393 136,788 175,814 222,317 158,985 (59,496) 299,031 343,885 374,836 404,822 433,160
Interest on borrowings (5,322) (8,429) (12,081) (17,732) (20,920) (18,121) (24,812) (24,053) (25,341) (22,630) (23,918)
Income from cash 556 989 1,265 1,823 2,780 4,189 4,189 4,189 4,189 4,189 4,189
Net borrowing cost (4,766) (7,440) (10,816) (15,909) (18,140) (13,932) (20,623) (19,864) (21,152) (18,441) (19,729)
Result from foreign-exchange operations 1,159 (5,168) (2,288) (5,747) (5,311) (3,787) (3,787) (3,787) (3,787) (3,787) (3,787)
Other financial expenses (1,764) (3,666) (5,449) (56) (23,941) (1,474) (1,474) (1,474) (1,474) (1,474) (1,474) this both wont have any increase of change since there is no acuisition or gain or loss from foreign exchange
Other financial income 6,083 2,548 2,348 8,312 36,515 132 132 132 132 132 132
Net financial income 712 (13,726) (16,205) (13,400) (10,877) (19,061) (25,752) (24,993) (26,281) (23,570) (24,858)
Share in profit of associates 0 0 (339) (224) 294 0 0 0 0 0 0
Total income tax (53,094) (29,654) (51,457) (69,241) (48,417) (45,685) (87,449) (102,045) (111,538) (122,001) (130,657)
Consolidated net income 87,011 93,408 107,813 139,452 99,985 (124,242) 185,830 216,847 237,017 259,251 277,645
Net income attributable to non-controlling interests 0 0 0 0 0 1,382 1,382 1,382 1,382 1,382 1,382
Net income attributable to owners of the parent company 87,011 93,408 107,813 139,452 99,985 (125,624) 184,448 215,465 235,635 257,869 276,263
Ubisoft Entertainment SA and Subsidiaries
Consolidated Balance Sheets
March 31,
(In thousands of euros) Forecast
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
ASSETS
Goodwill 129,906 106,194 180,735 259,462 290,721 334,558 334,558 334,558 334,558 334,558 334,558
Other intangible assets 572,225 647,602 736,465 782,402 882,925 1,115,283 1,225,437 1,341,099 1,462,544 1,490,061 1,723,954
Property, plant and equipment 80,983 83,946 106,375 114,116 159,958 174,393 174393 174393 174393 174393 174393
Right-of-use assets 0 0 0 0 0 229,906 229,906 229,906 229,906 229,906 229,906
Investments in associates 0 0 (69) (289) 7 7 7 7 7 7 7
Non-current financial assets 4,162 4,339 5,478 106,895 8,660 13,710 13,710 13,710 13,710 13,710 13,710
Deferred tax assets 134,954 122,193 88,831 84,181 168,443 169,338 169,338 169,338 169,338 169,338 169,338
Non-current assets 922,230 964,274 1,117,815 1,346,767 1,510,714 2,037,195 2,147,349 2,263,011 2,384,456 2,411,973 2,645,866
Inventory 18,425 19,374 25,359 20,264 31,880 12,446 15,558 17,892 19,502 21,062 22,536 along with COGS
Trade receivables 23,904 419,577 405,557 435,573 476,641 307,060 383,825 441,399 481,125 519,615 555,988 Along with revenue
Other receivables 113,855 100,985 146,467 208,778 179,982 127,456 127,456 127,456 127,456 127,456 127,456 Along with revenue
Current financial assets 4,919 13,780 1,131 8,320 184 453 543 543 543 543 543
Current tax assets 12,380 41,464 32,967 38,481 39,555 41,034 41034 41034 41034 41034 41034
Cash and cash equivalents 656,661 461,375 852,699 746,939 1,049,803 1,079,197 1,011,930 1,218,801 1,243,914 1,291,549 1,256,919
Current assets 830,144 1,056,555 1,464,180 1,458,355 1,778,045 1,567,646 1,580,346 1,847,125 1,913,574 2,001,259 2,004,476
Total assets 1,752,374 2,020,829 2,581,995 2,805,122 3,288,759 3,604,841 3,727,695 4,110,136 4,298,030 4,413,232 4,650,342
LIABILITIES AND EQUITY
Share capital 8,478 8,710 8,752 8,652 8,650 9,374 9,374 9,374 9,374 9,374 9,374
Premiums 180,515 215,125 280,975 234,123 335,759 863,547 980,762 1,108,059 1,242,313 1,383,307 1,530,671
Consolidated reserves 703,378 701,267 736,276 507,102 475,624 567,256 314,632 526,070 441,545 577,180 435,049
Consolidated earnings 87,011 93,408 107,813 139,453 99,985 (125,624) 184,448 215465 235635 257869 276263
Equity attributable to owners of the parent company 979,382 1,018,510 1,133,816 889,330 920,018 1,314,553 1,489,216 1,858,968 1,928,867 2,227,730 2,251,357
Non-controlling interests 0 0 0 0 0 7,190 7,190 7,190 7,190 7,190 7,190
Total equity 979,382 1,018,510 1,133,816 889,330 920,018 1,321,743 1,496,406 1,866,158 1,936,057 2,234,920 2,258,547
Provisions 7,497 8,888 4,246 3,074 2,469 3,091 3,091 3,091 3,091 3,091 3,091
Employee benefit liabilities 5,430 6,618 9,079 10,289 14,382 15,769 15,769 15,769 15,769 15,769 15,769
Long-term borrowings and other financial liabilities 275,739 277,383 640,705 933,629 890,366 1,176,198 1,138,221 702,644 467,067 1,031,490 1,095,913
Deferred tax liabilities 48,944 47,648 72,773 96,047 127,902 109,531 109,531 109,531 109,531 109,531 109,531
Other non-current liabilities 0 0 0 0 0 59,568 59,568 59,568 59,568 59,568 59,568
Non-current liabilities 337,610 340,537 726,803 1,043,039 1,035,119 1,364,157 1,326,180 890,603 655,026 1,219,449 1,283,872
Short-term borrowings and other financial liabilities 183,226 228,218 293,403 361,538 453,299 246,863 102,400 500,000 800,000 100,000 100,000
Trade payables 94,919 206,246 178,283 176,613 188,787 139,208 174,010 200,112 218,122 235,572 252,062
Other liabilities (includes deferred revenue) 149,614 213,807 219,818 321,935 664,618 517,730 586,469 638,023 673,595 708,061 740,631
Current tax liabilities 7,623 13,511 29,872 12,667 26,918 15,140 15,140 15,140 15,140 15,140 15,140
Current liabilities 435,382 661,782 721,376 872,753 1,333,622 918,941 878,019 1,353,275 1,706,857 1,058,773 1,107,833
Total liabilities and equity 1,752,374 2,020,829 2,581,995 2,805,122 3,288,759 3,604,841 3,700,605 4,110,036 4,297,940 4,513,142 4,650,252
Ubisoft Entertainment SA and Subsidiaries
Consolidated Cash Flow Statements
For the Years Ended March 31,
(In thousands of euros) Forecast
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Cash flows from operating activities
Consolidated earnings 87,011 93,408 107,813 139,452 99,985 (124,242) 184,448 215,465 235,635 257,869 276,263
Share in profit of associates 0 0 338 224 (294) 0 0 0 0 0 0
Net amortization and depreciation on PP&E 510,963 462,800 474,635 544,031 584,259 619,429 683,762 717,950 753,848 791,540 831,117
Net provisions 3,201 449 (2,563) 4,052 22,039 2,264 0 0 0 0 0
Cost of stock-based-compensation 9,609 12,918 36,836 39,558 54,686 53,772 67,215 77,297 84,254 90,994 97,364
Gains/losses on disposals 64 104 408 308 261 682 0 0 0 0 0
Other income and expenses calculated (15,534) 24,335 (10,655) 8,578 (5,403) 10,650 0 0 0 0 0
Tax expense 53,094 29,654 51,457 69,241 48,418 45,685 87,449 102,045 111,538 122,001 130,657
Cash flows from operating activities 648,408 623,668 658,269 805,444 803,951 608,240 1,022,874 1,112,757 1,185,275 1,262,404 1,335,401
Inventory 3,007 (11) (5,381) 229 (31,326) 20,186 (3,112) (2,334) (1,610) (1,560) (1,474)
Customers (trade receivables) 53,783 (402,877) 31,934 (61,544) (18,031) 182,891 (76,765) (57,574) (39,726) (38,490) (36,373)
Other assets (excluding deferred tax assets) (23,503) (30,588) 17,240 (81,048) 28,408 58,194 0 0 0 0 0
Suppliers (trade payables) (5,292) 116,466 (45,082) 15,243 3,181 (49,199) 34,802 26,102 18,010 17,450 16,490
Other liabilities (excluding deferred tax liabilities) 34,034 61,635 24,871 49,380 6,389 (51,805) 0 0 0 0 0
Deferred income and prepaid expenses 0 0 0 (3,089) 248,384 (96,525) 68,739 51,554 35,572 34,466 32,570
Change in WCR linked to operating activities 62,029 (255,375) 23,582 (80,829) 237,005 63,742 23,664 17,748 12,246 11,866 11,213
Current tax (56,362) (27,586) (36,140) (33,460) (68,582) (71,624) (87,449) (102,045) (111,538) (122,001) (130,657)
Total cash flow generated by (used in) operting activities 654,075 340,707 645,711 691,155 972,374 600,358 959,089 1,028,460 1,085,983 1,152,269 1,215,957
Cash flows from investment activities
Payments for internal and external developments (421,683) (489,464) (496,588) (521,290) (587,699) (651,202) (683,762) (717,950) (753,848) (791,540) (831,117)
Payments for other intangible assets and PP&E (56,244) (42,499) (62,916) (59,366) (74,402) (104,909) (110,154) (115,662) (121,445) (127,517) (133,893)
Proceeds from the disposal of intangible assets and PP&E 122 67 603 20 25 179 0 0 0 0 0
Payments for the acquisition of financial assets (23,709) (34,391) (44,373) (31,493) (43,816) (215,697) 0 0 0 0 0
Security deposit CACIB 0 0 0 (100,000) 100,000 0 0 0 0 0 0
Refund of loans and other financial assets 23,373 34,115 43,322 29,790 42,057 210,498 0 0 0 0 0
Changes in scope (3,188) 358 (105,642) (77,589) (84,327) (143,735) 0 0 0 0 0
Cash generated by (used in) investing activities (481,329) (531,814) (665,594) (759,928) (648,162) (904,866) (793,916) (833,612) (875,293) (919,057) (965,010)
Cash flow from financing activities
New finance leases contracted 10,142 0 1,416 5,054 20 0 0 0 0 0 0
New borrowings 622,185 234,540 669,165 893,596 604,985 935,241 100,000 100,000 600,000 700,000 200,000
Accrued interest 87 14 (18) 1,002 (1,324) (25) 0 0 0 0 0
Refund of borrowings in relation to leases (291) (891) (898) (1,672) (1,300) (35,577) (35,577) (35,577) (35,577) (35,577) (35,577)
Repayment of borrowings (466,578) (230,216) (214,663) (487,677) (572,177) (584,908) (246,863) (102,400) (500,000) (800,000) (100,000)
Funds received from shareholders in capital increases 18,054 21,924 9,465 48,951 131,910 81,466 50,000 50,000 50,000 50,000 50,000
Sales/purchases of own shares 650 (77,272) (67,844) (411,498) (201,899) 35,348 (100,000) 0 (300,000) (100,000) (400,000)
Associated current accounts (260) 258 0 0 0 0
Cash generated by (used in) financing activities 183,989 (51,643) 396,623 47,756 (39,785) 431,545 (232,440) 12,023 (185,577) (185,577) (285,577)
Net change in cash and cash equivalents 356,735 (242,750) 376,740 (21,017) 284,427 127,037 (67,267) 206,871 25,113 47,635 (34,630)
Cash and cash equivalents at the beginning of the period 115,610 505,215 255,688 632,314 583,354 878,612 986,927 919,660 1,126,531 1,151,644 1,199,279
Foreign exchange losses/gains 32,870 (6,777) (114) (27,943) 10,831 (18,722) 0 0 0 0 0
Cash and cash equivalents at the end of the period 505,215 255,688 632,314 583,354 878,612 986,927 919,660 1,126,531 1,151,644 1,199,279 1,164,649
Change in operating assets $190,121 $175,570 $162,781 $67,567 $271,740
Change in operating liabilities $27,817 $526,810 $389,154 -$613,618 $81,630
Net investment $162,304 -$351,240 -$226,373 $681,185 $190,110
EBIT $299,031 $343,885 $374,836 $404,822 $433,160
Tax rate 29% 30% 30% 30% 30%
NOPAT $212,312 $240,720 $262,385 $283,375 $303,212
Free Cash Flow to Firm $50,008 $591,960 $488,758 -$397,810 $113,102
Reinvestment Rate 76.0% -146.0% -86.0% 240.0% 63.0%
Return on Capital 8.0% 9.0% 11.0% 9.0% 9.0%
Valuation
PV of 2019 – 2023 $821,918
Terminal Value $38,852,929
Cash and cash equivalents (existing cash) $1,079,197
PV of Debt -$1,423,061
Value of equity $39,330,984
Additional computations and assumptions
Tax rate 30.00% Equity (market value) 8,471,408
Terminal growth rate. (pg223,2020) 1.20% Debt 1,423,061
Percent of equity 85.60%
Risk free rate 0.67% Percent of debt 14.4%
Beta 1.77%
Risk premium 5.65% WACC 1.5%
CAPM (cost of equity) 0.77%
Number of shares (million) 120,951
Pretax cost of debt 8.10% Stock price 70.04
After tax cost of debt 5.60%
2015 2016 2018 2017
77.0% 78.1% 81.4% 82.9% 82.2% 84.1%
11.0% 11.2% 13.8% 15.0% 11.3% 2.6%
5.9% 6.7% 7.4% 8.1% 5.4% -7.9%
67.5% 57.8% 49.7
