Borussia Dortmund |
Das Wunder von Dortmund is still alive |
Half-year results |
Travel & leisure |
8 March 2019 |
Share price performance
Business description
Next events
Analysts
Borussia Dortmund is a client of Edison Investment Research Limited |
The recent dip in form (one win in eight games) risks distracting from Borussia Dortmund’s highly successful season with a new head coach and a developing squad. While disappointment is understandable, given raised expectations, the share price upset (down over 25% from its November peak) appears exaggerated as Dortmund (BVB) remains well-placed for its Bundesliga title challenge and has already all but secured Champions League participation for next season, its overriding KPI. Moreover, we are now raising forecasts to reflect the buoyancy of international TV marketing and January’s bumper transfer of Pulisic. Transfermarkt.de’s new €45m upgrade in squad valuation, highlighted by Sancho (18) as most valuable Bundesliga player (€80m), suggests more to come, reinforcing EV/EBITDA of under 6x FY19e as unbecoming of BVB’s brand and financial strengths.
Year end |
Revenue* (€m) |
EBITDA |
PBT** |
EPS** |
DPS |
EV/EBITDA |
06/17 |
328.4 |
74.1 |
61.1 |
0.56 |
0.06 |
8.6 |
06/18 |
313.3 |
126.6 |
111.2 |
1.03 |
0.06 |
4.9 |
06/19e |
365.0 |
105.0 |
94.0 |
0.87 |
0.06 |
5.9 |
06/20e |
378.0 |
110.0 |
100.0 |
0.92 |
0.06 |
5.7 |
Note: *Before player transfer income. **PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Q2 step change in EBITDA
Admittedly against a weak comparative, the three months to December saw an impressive 41% increase in pre-transfer revenue, driven by sporting success, ie 10 Bundesliga wins against two and top of Champions League group table compared with just two points last time, and a favourable y-o-y fixture pattern (10 home games vs seven). This led to a near doubling in TV marketing income from European competition, boosted by some residual from the previous year, which is customary. On-field buoyancy also permeated advertising, up 6% thanks to Champions League knockout bonuses in addition to the benefit of newly enhanced virtual advertising to international audiences, and merchandising, up 8% in otherwise sluggish conditions. Notwithstanding the absence of severance costs related to the previous coach’s set-up, the rise in EBITDA (from €2m to €31m) was striking in the face of understandably persistent wage pressure (+11%).
Strong across the board
The changes to our forecasts, detailed on page 2, relate mainly to player transfers and TV marketing. The €18m EBITDA upgrade for the current year reflects the €64m transfer of Pulisic to Chelsea (no change in our c €25m allowance for end of season dealings) and €15m higher TV marketing revenue than we had expected.
Valuation: Asset-rich
Transfermarkt.de’s new Bundesliga player valuation (€602m) provides a respected pointer to Dortmund’s hidden reserves (c €400m surplus of market value to net player assets). Admittedly notional and at possible sporting cost, this is a welcome buttress to our forecasts, given the increasing reliance on transfers.
Revenue and profit analysis
Exhibit 1: Revenue and profit analysis
Year end June (€m) |
Q118 |
Q218 |
H218 |
FY18 |
Q119 |
Q219 |
H219e |
FY19e |
FY20e |
Home matches: |
▲ |
||||||||
Bundesliga |
3 |
5 |
9 |
17 |
3 |
6 |
8 |
17 |
17 |
Champions League |
1 |
2 |
- |
3 |
- |
3 |
1 |
4 |
4 |
Europa League |
- |
- |
2 |
2 |
- |
- |
- |
- |
- |
Domestic cups |
1 |
- |
- |
1 |
- |
1 |
1 |
2 |
2 |
Away matches: |
|||||||||
Champions League |
1 |
2 |
- |
3 |
1 |
2 |
1 |
4 |
4 |
Europa League |
- |
- |
2 |
2 |
- |
- |
- |
- |
- |
Domestic cups |
1 |
2 |
- |
3 |
1 |
- |
- |
1 |
3 |
Revenue |
|||||||||
Match operations: |
|||||||||
Bundesliga |
4.8e |
8.3e |
14.3e |
27.4 |
4.8 |
10.0e |
13.0e |
27.8 |
28.0 |
Champions League |
2.0e |
3.8e |
- |
5.8 |
- |
6.0e |
2.2e |
8.2 |
8.2 |
Europa League |
- |
- |
3.3 |
3.3 |
- |
- |
- |
- |
- |
Domestic cups |
1.2e |
0.8e |
0.2e |
2.2 |
0.1 |
0.6e |
0.9e |
1.6 |
3.5 |
Other |
2.6e |
0.2e |
0.7e |
3.5 |
5.8 |
0.1e |
0.5e |
6.4 |
6.3 |
Total |
10.6 |
13.2 |
18.5 |
42.3 |
10.7 |
16.7 |
16.6 |
44.0 |
46.0 |
TV marketing: |
|||||||||
Bundesliga |
21.6 |
21.8 |
44.6 |
88.0 |
24.5 |
23.9 |
49.6 |
98.0 |
103.0 |
Champions League |
18.9 |
9.2 |
- |
28.1 |
22.3 |
34.4 |
13.3 |
70.0 |
70.0 |
Europa League |
- |
- |
3.6 |
3.6 |
- |
- |
- |
- |
- |
Domestic cups |
1.8 |
0.8 |
- |
2.6 |
0.2 |
0.3 |
0.5 |
1.0 |
4.0 |
Total |
42.3 |
31.8 |
48.2 |
122.3 |
47.0 |
58.6 |
63.4 |
169.0 |
177.0 |
Advertising |
21.3 |
23.9 |
48.8 |
94.0 |
21.1 |
25.4 |
50.5 |
97.0 |
99.0 |
Merchandising |
8.7 |
10.7 |
10.1 |
29.5 |
6.6 |
11.6 |
9.8 |
28.0 |
28.0 |
Catering/other |
5.8 |
7.2 |
12.2 |
25.2 |
5.8 |
10.2 |
11.0 |
27.0 |
28.0 |
Revenue before transfers |
88.7 |
87.0 |
137.6 |
313.3 |
91.1 |
122.5 |
151.3 |
365.0 |
378.0 |
Transfers |
136.1* |
- |
86.6** |
222.7 |
41.0*** |
1.4 |
87.6**** |
130.0 |
130.0 |
Total revenue |
224.8 |
87.0 |
224.2 |
536.0 |
132.1 |
123.9 |
238.9 |
495.0 |
508.0 |
Other operating income |
0.5 |
2.3 |
1.1 |
3.9 |
0.7 |
3.5 |
0.8 |
5.0 |
4.5 |
Labour costs |
(43.9) |
(50.4) |
(92.4) |
(186.7) |
(45.3) |
(56.0) |
(98.7) |
(200.0) |
(210.0) |
Material costs |
(5.6) |
(6.7) |
(7.8) |
(20.1) |
(4.5) |
(7.1) |
(7.4) |
(19.0) |
(19.5) |
Other operating costs |
(94.4) |
(29.8) |
(82.3) |
(206.5) |
(60.3) |
(33.0) |
(82.7) |
(176.0) |
(173.0) |
EBITDA |
81.4 |
2.5 |
42.7 |
126.6 |
22.8 |
31.3 |
50.9 |
105.0 |
110.0 |
Source: Edison Investment Research. Note: ▲ Assuming Champions League round of 16 and DFB Cup semi-final. *Including disposals of Dembélé, Bender, Merino and Mor. **Including disposals of Aubameyang and Bartra. ***Including disposals of Sokratis and Yarmolenko. ****Including disposal of Pulisic.
Exhibit 2: Financial summary
€'000s |
2017 |
2018 |
2019e |
2020e |
||
June year-end |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
|
|||||
Revenue |
|
|
405,700 |
536,000 |
495,000 |
508,000 |
EBITDA |
|
|
74,100 |
126,600 |
105,000 |
110,000 |
Operating Profit (before amort. and except.) |
62,600 |
115,500 |
94,000 |
99,000 |
||
Intangible Amortisation |
(51,900) |
(59,000) |
(65,000) |
(68,000) |
||
Exceptionals |
0 |
(20,400) |
0 |
0 |
||
Other |
0 |
0 |
0 |
0 |
||
Operating Profit |
10,700 |
36,100 |
29,000 |
31,000 |
||
Net Interest |
(1,500) |
(4,300) |
0 |
1,000 |
||
Other financial items |
0 |
0 |
0 |
0 |
||
Profit Before Tax (norm) |
|
|
61,100 |
111,200 |
94,000 |
100,000 |
Profit Before Tax (FRS 3) |
|
|
9,200 |
31,800 |
29,000 |
32,000 |
Tax |
(900) |
(3,300) |
(3,000) |
(4,000) |
||
Profit After Tax (norm) |
51,900 |
94,500 |
79,900 |
85,000 |
||
Profit After Tax (FRS 3) |
8,300 |
28,500 |
26,000 |
28,000 |
||
Minority interests |
0 |
0 |
0 |
0 |
||
Net income (normalised) |
51,900 |
94,500 |
79,900 |
85,000 |
||
Profit after tax (FRS3) |
8,300 |
28,500 |
26,000 |
28,000 |
||
Average Number of Shares Outstanding (m) |
92.0 |
92.0 |
92.0 |
92.0 |
||
EPS - normalised (c) |
|
|
56.4 |
102.7 |
86.8 |
92.4 |
EPS - (IFRS) (c) |
|
|
9.0 |
31.0 |
28.3 |
30.4 |
Dividend per share (c) |
6.0 |
6.0 |
6.0 |
6.0 |
||
EBITDA Margin (%) |
18.3 |
23.6 |
21.2 |
21.7 |
||
Operating Margin (before GW and except.) (%) |
15.4 |
21.5 |
19.0 |
19.5 |
||
BALANCE SHEET |
||||||
Fixed Assets |
|
|
354,900 |
341,900 |
384,000 |
395,000 |
Intangible Assets |
141,500 |
109,700 |
159,000 |
173,000 |
||
Tangible Assets |
184,700 |
180,700 |
178,000 |
175,000 |
||
Investments |
28,700 |
51,500 |
47,000 |
47,000 |
||
Current Assets |
|
|
123,700 |
136,400 |
107,000 |
105,000 |
Stocks |
9,000 |
5,600 |
6,000 |
6,000 |
||
Debtors |
48,800 |
23,000 |
28,000 |
28,000 |
||
Cash |
49,300 |
59,500 |
53,000 |
51,000 |
||
Other |
16,600 |
48,300 |
20,000 |
20,000 |
||
Current Liabilities |
|
|
(140,900) |
(119,000) |
(122,000) |
(122,000) |
Creditors |
(130,600) |
(117,000) |
(122,000) |
(122,000) |
||
Short term borrowings |
0 |
0 |
0 |
0 |
||
Finance leases |
(10,300) |
(2,000) |
0 |
0 |
||
Long Term Liabilities |
|
|
(25,400) |
(23,000) |
(22,000) |
(22,000) |
Long term borrowings |
0 |
0 |
0 |
0 |
||
Finance leases |
(8,700) |
(6,700) |
(7,000) |
(7,000) |
||
Other long term liabilities |
(16,700) |
(16,300) |
(15,000) |
(15,000) |
||
Net Assets |
|
|
312,300 |
336,300 |
347,000 |
356,000 |
CASH FLOW |
||||||
Operating Cash Flow |
|
|
117,900 |
163,500 |
125,000 |
130,000 |
Net Interest |
(2,100) |
(3,700) |
0 |
1,000 |
||
Tax |
(5,500) |
(1,700) |
(6,000) |
(4,000) |
||
Capex |
(8,100) |
(7,200) |
(8,300) |
(8,500) |
||
Player acquisitions |
(96,500) |
(123,600) |
(110,000) |
(115,000) |
||
Financing |
0 |
(1,300) |
0 |
0 |
||
Dividends |
(5,500) |
(5,500) |
(5,500) |
(5,500) |
||
Net Cash Flow |
200 |
20,500 |
(4,800) |
(2,000) |
||
Opening net debt/(cash) |
|
|
(30,100) |
(30,300) |
(50,800) |
(46,000) |
Finance leases initiated |
0 |
0 |
0 |
0 |
||
Other |
0 |
0 |
0 |
0 |
||
Closing net debt/(cash) |
|
|
(30,300) |
(50,800) |
(46,000) |
(44,000) |
Source: Company data, Edison Investment Research
|
|