Exciting viewing ahead

Borussia Dortmund 15 November 2019 Update
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Borussia Dortmund

Exciting viewing ahead

Q120 results

Travel & leisure

15 November 2019

Price

€8.23

Market cap

€757m

Net cash (€m) at 30 September 2020

17

Shares in issue

92.0m

Free float

60.1%

Code

BVB

Primary exchange

Frankfurt

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(12.4)

(13.1)

(12.0)

Rel (local)

(17.0)

(24.3)

(23.8)

52-week high/low

€9.95

€7.02

Business description

The group operates Borussia Dortmund, a leading German football cub, Bundesliga runners-up in 2018/19, DFB Super Cup winners in 2019/20, DFB Cup winners in 2016/17 and competing in this season’s UEFA Champions League (Round of 16 participants in 2018/19).

Next events

Champions League against Barcelona

27 November 2019

Interim results

February 2020

Analysts

Russell Pointon

+44 (0)20 3077 5757

Neil Shah

+44 (0)20 3077 5700

Borussia Dortmund is a client of Edison Investment Research Limited

Borussia Dortmund’s Q120 results exhibited typical volatility due to the key summer transfer window. Excluding the volatile transfer revenue, there was good growth with other revenue up c 15%. We maintain our forecasts but note there is a key Champions League game in less than two weeks and results in the Bundesliga must improve to ensure qualification for the competition next season. The shares continue to look well supported by its player assets and the FY20e EV/EBITDA multiple of 5.8x.

Year end

Revenue* (€m)

EBITDA (€m)

PBT**
(€m)

EPS**
(€)

DPS
(€)

P/E
(x)

EV/EBITDA
(x)

06/18

313.3

137.3

121.9

1.13

0.06

7.3

5.4

06/19

369.3

116.0

101.5

0.94

0.06

8.8

6.4

06/20e

394.0

128.0

113.0

1.05

0.06

7.8

5.8

06/21e

414.0

132.0

116.0

1.07

0.06

7.7

5.6

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

Q120: Heavily skewed by transfer activity

The first quarter was a busy period for transfer activity as the coaching staff (second full season) re-shaped the team with five players sold and six players added (including option exercises). Total revenue increased by c 33% y-o-y to €175.2m, compared to a relatively subdued quarter for transfer activity in Q119 with just two players sold. Excluding transfers (+70% y-o-y), total revenue increased by c 15%, with good growth from other sources, excluding match operations (c 5% of revenue). Match operations revenue declined by c 20% y-o-y, mainly due to fewer pre-season friendlies. Successful exploitation of the brand came through more partnership relationships and a documentary of the club on Amazon. There were encouraging signs of an improvement in Merchandising, with the key Christmas period coming. Operating income was affected by player sales: an operating loss of €757k in Q120 versus a profit of €6.4m in Q119.

Key Champions League fixture imminent

As it is still the early stages of the season, we leave our forecasts unchanged. Our key assumptions are that the team progresses through to the Champions League Round of 16 of and finishes in the top four of the Bundesliga. The team is placed second from four in a tight Champions League group, with a tough away game to FC Barcelona on 27 November, before a home game against Slavia Prague. In the Bundesliga, the results have been more mixed: the current league position is sixth, albeit in a relatively compact league, against a leading position this time last year.

Valuation: Share price affected by playing results

The shares have underperformed due to a less successful domestic start than the 2018/19 season. The latest squad valuation per www.transfermarkt.de is c €576m (down from c €610m in our most recent prior note) compared to the balance sheet value of player registrations and assets held for sale of €269m, which highlights the hidden value in a club with a proven track record of successful value realisation. The EV/EBITDA multiples for FY20e and FY21e are 5.8x and 5.6x, respectively.

Exhibit 1: Financial summary

€'000s

2018

2019

2020e

2021e

Year end June

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

 

 

Revenue

 

 

536,000

489,500

534,000

564,000

EBITDA

 

 

137,300

116,000

128,000

132,000

Operating Profit (before amort. and except.)

 

 

126,200

103,200

114,000

117,000

Intangible Amortisation

(66,800)

(65,900)

(85,000)

(90,000)

Exceptionals

(20,400)

(13,800)

0

0

Other

0

0

0

0

Operating Profit

39,000

23,500

29,000

27,000

Net Interest

(4,300)

(1,700)

(1,000)

(1,000)

Other financial items

0

0

0

0

Profit Before Tax (norm)

 

 

121,900

101,500

113,000

116,000

Profit Before Tax (FRS 3)

 

 

34,700

21,800

28,000

26,000

Tax

(3,000)

(4,400)

(5,000)

(5,000)

Profit After Tax (norm)

103,600

86,300

96,100

98,600

Profit After Tax (FRS 3)

31,700

17,400

23,000

21,000

Minority interests

0

0

0

0

Net income (normalised)

103,600

86,300

96,100

98,600

Profit after tax (FRS3)

31,700

17,400

23,000

21,000

Average Number of Shares Outstanding (m)

92.0

92.0

92.0

92.0

EPS - normalised (c)

 

 

112.6

93.8

104.5

107.2

EPS - (IFRS) (c)

 

 

34.5

18.9

25.0

22.8

Dividend per share (c)

6.0

6.0

6.0

6.0

EBITDA Margin (%)

25.6

23.7

24.0

23.4

Operating Margin (before GW and except.) (%)

23.5

21.1

21.3

20.7

BALANCE SHEET

Fixed Assets

 

 

351,400

371,700

414,000

445,000

Intangible Assets

120,300

163,700

200,000

230,000

Tangible Assets

180,700

184,000

181,000

180,000

Investments

50,400

24,000

33,000

35,000

Current Assets

 

 

134,200

128,400

114,000

101,000

Stocks

5,600

4,600

5,000

5,000

Debtors

23,000

30,100

32,000

34,000

Cash

59,500

55,900

44,000

29,000

Other

46,100

37,800

33,000

33,000

Current Liabilities

 

 

(119,000)

(128,100)

(132,000)

(134,000)

Creditors

(117,000)

(125,000)

(129,000)

(131,000)

Short term borrowings

0

0

0

0

Finance leases

(2,000)

(3,100)

(3,000)

(3,000)

Long Term Liabilities

 

 

(23,000)

(17,100)

(17,000)

(18,000)

Long term borrowings

0

0

0

0

Finance leases

(6,700)

(8,400)

(8,000)

(6,000)

Other long term liabilities

(16,300)

(8,700)

(9,000)

(12,000)

Net Assets

 

 

343,600

354,900

379,000

394,000

CASH FLOW

Operating Cash Flow

 

 

168,100

150,700

150,000

154,000

Net Interest

(3,700)

(1,500)

(1,000)

(1,000)

Tax

(1,700)

(2,800)

(4,000)

(4,000)

Capex

(7,200)

(9,900)

(10,900)

(11,500)

Acquisitions/disposals

(135,600)

(129,500)

(140,000)

(145,000)

Financing

6,100

(7,900)

0

0

Dividends

(5,500)

(5,500)

(5,500)

(5,500)

Net Cash Flow

20,500

(6,400)

(11,400)

(13,000)

Opening net debt/(cash)

 

 

(30,300)

(50,800)

(44,400)

(33,000)

Finance leases initiated

0

0

0

0

Other

0

0

0

0

Closing net debt/(cash)

 

 

(50,800)

(44,400)

(33,000)

(20,000)

Source: Company accounts, Edison Investment Research


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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 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.

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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.

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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.

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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 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 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 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

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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