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Ubisoft unveils big profit warning, cancels more games as Xmas sales slump

Published: 05:22 12 Jan 2023 EST

Ubisoft Entertainment -
Unfortunately titled Mario + Rabbids: Sparks of Hope

Ubisoft Entertainment (OTC:UBSFF, EPA:UBI) plunged in France and is likely to stumble in the US later after the video games company cut its forecasts due to festive sales of its Mario + Rabbids and Just Dance games being “markedly and surprisingly slower than expected”.

Citing a more challenging environment and lower-than-expected performance from its big game releases, the French gaming giant – known for its Assassin's Creed and Tom Clancy games such as Rainbow Six – slashed its third-quarter net bookings target by over €100mln and dropped its full-year target for net bookings to at least a 10% decline year-on-year versus prior expectations that it would increase over 10%.

Cancelling three unannounced projects on top of the four already nixed last summer, alongside the postponement of the Skull and Bones pirate game, the drop in full-year guidance also reflects increased depreciation of around €500mln (up from €400mln) of capitalized R&D.

It said the cancellations would allow it to increase the share of investment behind larger franchises, including Assassin's Creed, Rainbow Six, Far Cry, The Division and Ghost Recon, as well as strengthen its live service offer.

For the 2024 financial year, Ubisoft said it is targeting operating income of €400mln, "reflecting necessary prudence in the current challenging environment, while still expecting an overall strong topline growth thanks to a materially stronger line-up".

Management plan to reduce non-variable costs by more than €200mln over the next two years.

The shares fell 16% to €20.01, the lowest since 2016.

US broker Wedbush said it would lower its estimate for net bookings to €1.9bn from €2.34bn and for an operating loss of €500mln from its prior forecast of a €400mln profit.

For FY24 the analysts cut their estimate for net bookings to €2.1bn from €2.8bn and for operating profit to €400mln from €500mln.

"Ubisoft is likely to continue to slip big game releases, and we are not prepared to give them the benefit of the doubt," wrote analyst Michael Pachter.

UBS analysts said: "The company's back-catalog remains healthy with good activity on Rainbow Six Siege, momentum for Assassin’s Creed games and generally solid performance from live games."

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