A brief revival before more restrictions

Borussia Dortmund 5 April 2022 Update
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Borussia Dortmund

A brief revival before more restrictions

Q222 results

Travel & leisure

5 April 2022

Price

€4.07

Market cap

€449m

Net cash (€m) at 31 December 2021

5.9

Shares in issue

110.4m

Free float

72.3%

Code

BVB

Primary exchange

Frankfurt

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

15.4

(7.5)

(23.1)

Rel (local)

4.1

2.9

(20.0)

52-week high/low

€6.64

€3.35

Business description

The group operates Borussia Dortmund, a leading football club, placed third in the Bundesliga in 2020/21, DFB Super Cup winners in 2019/20 and DFB-Pokal winners in 2020/21. The club has qualified for the Champions League in nine of the last 10 seasons.

Next events

Q322 results

12 May 2022

FY22 results

August 2022

Analysts

Russell Pointon

+44 (0)20 3077 5700

Richard Finch

+44 (0)20 3077 5700

Borussia Dortmund is a research client of Edison Investment Research Limited

Borussia Dortmund’s Q222 results were affected by the imposition of new COVID-related restrictions towards the end of the period. Following the period end, the team was eliminated from the Europa League, having failed to qualify for the Champions League knockout stages before Christmas. Against this backdrop, the small downgrade in management guidance for FY22 profitability is testimony to the tight management of costs. The team is currently (comfortably) placed second in the Bundesliga so all will be looking forward to a more successful and profitable FY23. Our sum-of-the-parts valuation reduces to €11 per share.

Year end

Revenue (€m)

EBITDA (€m)

PBT*
(€m)

EPS*
(€)

DPS
(€)

P/E
(x)

EV/EBITDA
(x)

06/20

370.2

63.0

45.6

0.47

0.00

8.7

7.0

06/21

334.2

39.0

24.3

0.26

0.00

15.5

11.4

06/22e

350.4

81.5

65.8

0.57

0.00

7.1

5.4

06/23e

389.0

106.5

91.5

0.76

0.00

5.3

4.2

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

Q222: More games and Omicron restrictions

Q222’s year-on-year revenue decline of 2% includes growth for Match Operations, Advertising & Catering, and declines for TV Marketing and Merchandising. There were more competitive games in Q221 with more fans in aggregate than Q220, albeit the number of fans in attendance at individual games in both periods was affected by COVID-related restrictions. Higher advertising from new sponsorships was further testimony to the increasing appeal of the brand. Following a significant transfer window (Q122) with the headline-making sale of Sancho, activity was more muted as is typical. The c 12% y-o-y decline in EBITDA to €32.0m is mainly attributable to higher other operating expenses (matchday staff, performance-related bonuses, advertising expense, etc).

FY22: Management guidance reduced modestly

Management reduced its guidance for FY22, to a net loss of €17–24m (prior guidance: net loss of €12–17m) implies a, H222 net loss of at least €54.5m, greater than H221’s €46.6m. The lower profit primarily reflects the absence of later-stage European competition revenue and continuing restrictions on fan attendance into Q322, with some offsetting operating cost savings including lower player contract amortisation. Our forecasts are reduced to bring them in line with management’s new guidance.

Valuation: Asset-backed valuation of €11/share

Our asset-backed sum-of-the-parts valuation, adjusting for recent changes in peer group share prices and the company’s updated H122 balance sheet following the equity raise in October 2021, reduces to €11 per share, a reduction of 5% since our last update of €11.56 per share. The EV/Sales multiple for FY22e of 1.3x is at a discount to the long-term average (2005–21) of 1.6x. We see good potential for upside to the share price in the absence of disruption to revenue generation from further potential COVID-related disruptions.

Exhibit 1: Financial summary

€m

2019

2020

2021

2022e

2023e

30-June

IFRS

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue

 

 

370.3

370.2

334.2

350.4

389.0

Cost of Sales

(21.3)

(22.4)

(19.6)

(20.6)

(21.6)

Gross Profit

349.0

347.8

314.6

329.9

367.4

EBITDA

 

 

116.0

63.0

39.0

81.5

106.5

Normalised operating profit

 

 

103.2

49.1

25.3

67.7

92.5

Amortisation of acquired intangibles

(65.9)

(88.3)

(92.6)

(89.8)

(97.3)

Exceptionals

(13.8)

(3.9)

(4.8)

0.0

0.0

Reported operating profit

23.5

(43.1)

(72.1)

(22.1)

(4.8)

Net Interest

(1.7)

(3.4)

(1.1)

(1.9)

(1.0)

Joint ventures & associates (post tax)

0.0

(0.0)

0.1

0.0

0.0

Profit Before Tax (norm)

 

 

101.5

45.6

24.3

65.8

91.5

Profit Before Tax (reported)

 

 

21.8

(46.6)

(73.2)

(24.0)

(5.8)

Reported tax

(4.4)

2.6

0.3

0.0

0.0

Profit After Tax (norm)

80.9

43.0

24.2

60.5

84.2

Profit After Tax (reported)

17.4

(44.0)

(72.8)

(24.0)

(5.8)

Minority interests

0.0

0.0

0.0

0.0

0.0

Net income (normalised)

80.9

43.0

24.2

60.5

84.2

Net income (reported)

17.4

(44.0)

(72.8)

(24.0)

(5.8)

Average number of shares outstanding (m)

92.0

92.0

92.0

105.4

110.4

EPS - normalised (c)

 

 

87.9

46.8

26.3

57.4

76.2

EPS - diluted normalised (€)

 

 

0.88

0.47

0.26

0.57

0.76

EPS - basic reported (€)

 

 

0.19

(0.48)

(0.79)

(0.23)

(0.05)

Dividend (€)

0.06

0.00

0.00

0.00

0.00

Revenue growth (%)

18.2

(0.0)

(9.7)

4.9

11.0

Gross Margin (%)

94.3

94.0

94.1

94.1

94.4

EBITDA Margin (%)

31.3

17.0

11.7

23.3

27.4

Normalised Operating Margin

27.9

13.2

7.6

19.3

23.8

BALANCE SHEET

Fixed Assets

 

 

371.7

441.5

389.8

355.6

313.5

Intangible Assets

163.7

229.7

193.4

167.0

133.0

Tangible Assets

184.0

193.0

183.5

175.7

167.7

Investments & other

24.0

18.8

12.9

12.9

12.9

Current Assets

 

 

128.4

76.5

60.7

78.8

115.9

Stocks

4.6

6.8

6.8

10.5

11.2

Debtors

30.1

36.5

29.9

31.4

34.8

Cash & cash equivalents

55.9

3.3

1.7

14.7

47.6

Other

37.9

29.9

22.2

22.2

22.2

Current Liabilities

 

 

(125.4)

(122.6)

(163.6)

(88.5)

(89.5)

Creditors

(119.8)

(110.2)

(100.1)

(84.1)

(85.0)

Tax and social security

(0.8)

(0.0)

(0.0)

(0.0)

(0.0)

Short term borrowings

0.0

(8.0)

(56.9)

0.0

0.0

Finance leases

(3.1)

(4.4)

(4.2)

(2.1)

(2.1)

Other

(1.7)

0.0

(2.3)

(2.3)

(2.3)

Long Term Liabilities

 

 

(19.8)

(89.9)

(54.3)

(54.3)

(54.3)

Long term borrowings

0.0

0.0

0.0

0.0

0.0

Finance leases

(8.4)

(20.1)

(16.8)

(16.8)

(16.8)

Other long-term liabilities

(11.4)

(69.9)

(37.5)

(37.5)

(37.5)

Net Assets

 

 

354.9

305.4

232.6

291.6

285.7

Minority interests

0.0

0.0

0.0

0.0

0.0

Shareholders' equity

 

 

354.9

305.4

232.6

291.6

285.7

CASH FLOW

Op Cash Flow before WC and tax

111.9

59.5

37.9

79.6

105.5

Working capital

5.7

(18.0)

(6.9)

(21.2)

(3.3)

Exceptional & other

(84.6)

(38.9)

(13.6)

(58.1)

(59.0)

Tax

(2.8)

0.3

0.0

0.0

0.0

Operating cash flow

 

 

30.2

3.0

17.4

0.3

43.3

Capex

(9.9)

(6.1)

(3.4)

(6.0)

(6.0)

Net investment in intangibles

(13.6)

(44.6)

(58.6)

(3.3)

(3.3)

Acquisitions/disposals

0.0

0.0

0.0

0.0

0.0

Net interest

(1.5)

(3.3)

(1.4)

(1.9)

(1.0)

Equity financing

0.0

0.0

0.0

82.9

0.0

Dividends

(5.5)

(5.5)

0.0

0.0

0.0

Other

(3.3)

(3.9)

52.5

(59.0)

0.0

Net Cash Flow

(3.6)

(60.6)

6.4

13.0

32.9

Opening net debt/(cash)

 

 

(50.8)

(44.4)

29.1

76.2

6.4

Other non-cash movements

(2.8)

(12.9)

(53.6)

56.9

0.0

Closing net debt/(cash)

 

 

(44.4)

29.1

76.2

6.4

(26.6)

Source: Borussia Dortmund, Edison Investment Research

General disclaimer and copyright

This report has been commissioned by Borussia Dortmund and prepared and issued by Edison, in consideration of a fee payable by Borussia Dortmund. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2022 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by Borussia Dortmund and prepared and issued by Edison, in consideration of a fee payable by Borussia Dortmund. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2022 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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