Das Wunder von Dortmund is still alive

Borussia Dortmund 8 March 2019 Update
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Borussia Dortmund

Das Wunder von Dortmund is still alive

Half-year results

Travel & leisure

8 March 2019

Price

€7.25

Market cap

€667m

Net cash (€m) at December 2018 including finance leases

3.1

Shares in issue

92.0m

Free float

60.1%

Code

BVB

Primary exchange

FRA

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(18.7)

(10.3)

22.2

Rel (local)

(22.2)

(16.0)

29.9

52-week high/low

€10.1

€4.9

Business description

The group operates Borussia Dortmund, a leading German football club, DFB Cup winners in 2016/17 and Round of 16 participants in this season’s UEFA Champions League (quarter-finalists in 2016/17).

Next events

Edison roadshows, New York

12/13 March 2019

Bundesliga vs Bayern Munich

6 April 2019

Q3 results

15 May 2019

Analysts

Richard Finch

+44 (0)20 3077 5700

Paul Hickman

+44 (0)20 3681 2501

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
(€m)

PBT**
(€m)

EPS**
(€)

DPS
(€)

EV/EBITDA
(x)

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

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 £49,500 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 Edison analyst 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 2019 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2019. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

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Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd who holds an Australian Financial Services Licence (Number: 427484). 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

Neither this document and associated email (together, the "Communication") constitutes or form part of any offer for sale or subscription of, or solicitation of any offer to buy or subscribe for, any securities, nor shall it or any part of it form the basis of, or be relied on in connection with, any contract or commitment whatsoever. Any decision to purchase shares in the Company in the proposed placing should be made solely on the basis of the information to be contained in the admission document to be published in connection therewith.

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 (nor will such persons be able to purchase shares in the placing).

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

The Investment Research is a publication distributed in the United States by Edison Investment Research, Inc. Edison Investment Research, Inc. is registered as an investment adviser with the Securities and Exchange Commission. 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

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Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

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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

1,185 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 £49,500 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 Edison analyst 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 2019 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2019. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd who holds an Australian Financial Services Licence (Number: 427484). 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

Neither this document and associated email (together, the "Communication") constitutes or form part of any offer for sale or subscription of, or solicitation of any offer to buy or subscribe for, any securities, nor shall it or any part of it form the basis of, or be relied on in connection with, any contract or commitment whatsoever. Any decision to purchase shares in the Company in the proposed placing should be made solely on the basis of the information to be contained in the admission document to be published in connection therewith.

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 (nor will such persons be able to purchase shares in the placing).

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

The Investment Research is a publication distributed in the United States by Edison Investment Research, Inc. Edison Investment Research, Inc. is registered as an investment adviser with the Securities and Exchange Commission. 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

1,185 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

1,185 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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