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Bank: Ubisoft Q4 disappoints

May 17, 2022

Video games giant Ubisoft has reported another disappointing set of numbers in its quarterly results – which resulted in the company reducing its formal guidance.

A report on Ubisoft from investment bank Berenberg says that the company’s its Q4/22 trading and net bookings (at €664 million) were 6 per cent short of consensus which translated into overall 2022 net bookings falling about 5 per cent y-o-y.

Berenberg says that it has cut its (full year) 2023 forecasts for Ubisoft’s EBIT by about 23 percent. “A disappointing set of results was broadly expected – particularly in the context of a weak reporting season for many video gaming peers. We have made much smaller cuts to our FY/2024 and FY/2025 numbers.”

Ubisoft has been subject to market reports concerning potential private equity interest.

“Rumours of private equity interest led to a sharp appreciation of the share price in late April. According to separate reports, PE firms are either looking to buyout Ubisoft as a whole or to partner with the Guillemot family to fend off any approach from a strategic buyer,” says Berenberg, which maintains its “HOLD” advice to shareholders.

The bank addresses the private equity gossip, saying: “The next issue would be the reception of a potential PE offer. The rumours circulating in the industry at the moment suggest that the Guillemot family are open to a PE bid as it would insulate them from a potential approach from a strategic buyer. However, given the need to remove a significant portion of cash R&D for this example to be viable, we question whether the Guillemots would in fact be receptive to such an offer: it would most likely entail cutting outgoings such as crypto and NFT projects, essentially curtailing the creative freedom that the family have previously fought to retain.”

The Guillemot family hold 18 per cent of the company’s equity.

Ubisoft, says the bank, “has a compelling valuation and is set to benefit from a rapidly growing video games market, which has accelerated markedly due to government-imposed pandemic-related lockdowns, execution risk and cash flow issues make the risk-return profile less attractive. Ubisoft’s investments in the past few years position it well in terms of ‘open world’ games, but there is a consistent theme of delays that frustrates investors.”

“We believe that there is sizeable optionality within e-sports, streaming and taking console/PC games to mobile, as well as the Chinese market,” says Berenberg.

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