Hitting form

Borussia Dortmund 16 March 2017 Update
Download PDF

Borussia Dortmund

Hitting form

Half-year results

Travel & leisure

16 March 2017

Price

€5.30

Market cap

€489m

Net cash (€m) at December 2016 including finance leases

18.6

Shares in issue

92.0m

Free float

60.5%

Code

BVB

Primary exchange

Frankfurt

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(3.5)

(10.6)

32.9

Rel (local)

(6.5)

(20.2)

6.0

52-week high/low

€5.88

€3.76

Business description

The group operates Borussia Dortmund, a leading German football club, runners-up in the 2015/16 Bundesliga and quarter-finalists in this season’s UEFA Champions League (quarter-finalists in 2015/16 UEFA Europa League).

Next events

Champions League

quarter-finals

11/12 and 18/19 April 2017

DFB Cup semi-final against Bayern Munich

25/26 April 2017

Q3 results

12 May 2017

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

Although in transition after high-profile player departures, Borussia Dortmund (BVB) continues to compete well on all fronts. Its financial performance is similarly spirited with a near doubling in H1 pre-transfer EBITDA, driven by the Champions League. However, costs remain an issue, so we are maintaining our full-year pre-transfer EBITDA forecast despite better than expected progress in Europe. Apart from a new deal on Bundesliga media rights, FY18 should benefit from a significantly lower player cost base, hence our €8m EBITDA upgrade and forecast bumper cash generation (over €100m net cash at June 2018), which provides ample scope for profitable investment and returns to shareholders.

Year end

Revenue* (€m)

EBITDA*
(€m)

PBT**
(€m)

EPS**
(€)

DPS
(€)

EV/EBITDA
(x)

06/15

263.6

48.0***

44.2***

0.43***

0.05

9.6

06/16

281.3

15.3

73.8

0.68

0.06

30.0

06/17e

324.0

30.0

51.0

0.47

0.06

15.0

06/18e

336.0

50.0

74.0****

0.68****

0.07

7.6

Note: *Before player transfer income. **PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments. ***Including insurance claim benefit (our estimate €12m). ****Assuming €37m player transfer profit.

H1: Solid profit recovery

Fortunes were predictably buoyed by renewed Champions League access, so, while positive, rises of 18% and 72% in pre-transfer revenue and EBITDA, respectively, should be seen against a weak Europa League comparative (H116 pre-transfer EBITDA down 59% y-o-y). Aside from the Champions League broadcasting boost, revenue was broadly flat in advertising, merchandising and match operations, reflecting in part fewer home UEFA games. Labour costs from the renewed squad were up 18% in the period, slightly higher than we expected.

FY18 lower labour costs may not be wishful thinking

The changes to our forecasts, detailed on page 2, relate mainly to labour costs, which we now envisage up by c 25% in H217, as in Q2. This offsets the likely benefit from reaching an extra round (quarter-finals) of the Champions League, which drives our €17m full-year revenue upgrade. By contrast, labour costs may fall next year owing to a planned pruning of the squad (28 players of whom only 10 have started even half of this season’s matches). On current playing assumptions, we look for 7% lower labour costs and c €40m proceeds from associated transfers. Our forecast FY18 PBT reflects transfer gains, which are notional but reasonable, given the company’s record and surplus of market value to net player assets (c €220m if the December 2016 carrying value of €160m is set against the current www.transfermarkt.de valuation of €378m).

Valuation: All to play for

The market’s continuing appreciation of Dortmund rebuilding is justified in terms of potential trading profit break-out and significant transfer gains. However, with Champions League predicating our FY18 forecast, there is little room for Bundesliga slippage as BVB is now only narrowly in qualifying position.

Exhibit 1: Revenue and profit analysis

Year end June (€m)

H116

H216

FY16

H117

H217e

FY17e

2018e

Home Matches

Bundesliga

8

9

17

8

9

17

17

Champions League

-

-

-

3

2*

5

4******

Europa League

5

3

8

-

-

-

-

DFB Cup

1

-

1

1

1**

2

2**

SuperCup

-

-

-

1

-

1

-

Away Matches:

Champions League

-

-

-

3

2*

5

4******

Europa League

5

3

8

-

-

-

-

DFB Cup

2

2+Final

4+Final

1

2**

3

3**

Revenue

Match operations:

Bundesliga

12.9e

14.3e

27.1

12.7e

14.4e

27.1

27.5

Champions League

-

-

-

6.0e

3.4e

9.4

8.0

Europa League

7.5e

5.9e

13.4

-

-

-

-

DFB Cup/Super Cup

1.3e

2.4e

3.7

2.0e

1.5e

3.5

2.5

Other

1.8e

0.7e

2.5

1.6e

1.4e

3.0

3.0

Total

23.5

23.3

46.8

22.3

20.7

43.0

41.0

Broadcasting:

Bundesliga

30.0

30.8

60.8

32.5

33.5

66.0

90.0

Champions League

3.2

-

3.2

33.6

18.4

52.0

38.0

Europa League

8.3

5.7

14.0

0.9

-

0.9

-

DFB Cup/Super Cup

0.7

3.7

4.4

1.3

2.8

4.1

4.0

Total

42.2

40.4

82.6

68.3

54.7

123.0

132.0

Advertising

40.0

44.6

84.6

40.1

48.4

88.5

91.0

Merchandising

24.4

15.4

39.8

23.2

17.8

41.0

42.0

Catering / other

13.3

14.2

27.5

15.2

13.3

28.5

30.0

Total

143.5

137.8

281.3

169.0

155.0

324.0

336.0

Other operating income

1.9

1.6

3.5

1.7

2.3

4.0

4.0

Labour costs

(66.1)

(74.1)

(140.2)

(78.2)

(94.8)

(173.0)

(160.0)

Share of revenue

46%

54%

50%

46%

61%

53%

48%

Material costs

(14.5)

(11.2)

(25.7)

(14.4)

(11.6)

(26.0)

(27.0)

Other operating costs

(53.0)

(50.6)

(103.6)

(57.7)

(41.3)

(99.0)

(103.0)

EBITDA before transfers

11.8

3.5

15.3

20.4

9.6

30.0

50.0

Margin

8%

3%

5%

12%

6%

9%

15%

Profit on disposal of players

13.7

57.7

71.4

29.5****

4.5

34.0****

37.0*****

Transfer income

24.7

70.3

95.0

45.2

6.8

52.0

50.0

Less: Carrying value/selling costs

(11.0)

(12.6)***

(23.6)

(15.7)***

(2.3)

(18.0)***

(13.0)

Source: Borussia Dortmund accounts, Edison Investment Research. Note: *Assuming exit in quarter-finals. **Assuming exit in semi-final. ***Including selling costs (reported by BVB in labour and other operating costs) of €3m in Q416 and €8m in Q117. ****Predominantly on disposal of Mkhitaryan. *****Notional (assumed average of transfer profit in FY15, FY16 and FY17e). ******Assuming exit in Round of 16.


Exhibit 2: Financial summary

€000s

2015

2016

2017e

2018e

Year end June

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

263,600

281,300

324,000

336,000

EBITDA

 

 

48,000*

15,300

30,000

50,000

Player transfers

 

 

7,600

71,400

34,000

37,000

Operating Profit (before amort. and except.)

46,100

75,900

53,000

76,000

Intangible Amortisation

(32,900)

(32,000)

(50,000)

(45,000)

Exceptionals

0

(7,500)***

0

0

Other

0

0

0

0

Operating Profit

13,200

36,400

3,000

31,000

Net Interest

(1,900)

(2,100)

(2,000)

(2,000)

Other financial items

(5,300)**

0

0

0

Profit Before Tax (norm)

 

 

44,200

73,800

51,000

74,000

Profit Before Tax (FRS 3)

 

 

6,000

34,300

1,000

29,000

Tax

(500)

(4,900)

(200)

(3,500)

Profit After Tax (norm)

43,700

68,900

50,800

70,500

Profit After Tax (FRS 3)

5,500

29,400

800

25,500

Average Number of Shares Outstanding (m)

87.3

92.0

92.0

92.0

EPS - normalised (c)

 

 

42.7

68.2

47.2

68.4

EPS - (IFRS) (c)

 

 

6.0

32.0

0.9

27.7

Dividend per share (c)

5.0

6.0

6.0

7.0

EBITDA Margin (%)

18.2

5.4

9.3

14.9

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

17.5

27.0

16.4

22.6

BALANCE SHEET

Fixed Assets

 

 

289,500

302,800

316,000

258,000

Intangible Assets

96,300

65,300

126,000

70,000

Tangible Assets

189,500

188,400

185,000

183,000

Investments

3,700

49,100

5,000

5,000

Current Assets

 

 

97,000

121,800

106,500

185,500

Stocks

9,400

10,200

11,000

12,000

Debtors

29,700

51,100

30,000

41,000

Cash

53,700

51,700

61,500

128,500

Other

4,200

8,800

4,000

4,000

Current Liabilities

 

 

(61,600)

(78,800)

(80,500)

(81,500)

Creditors

(59,100)

(76,200)

(78,000)

(79,000)

Short term borrowings

0

0

0

0

Finance leases

(2,500)

(2,600)

(2,500)

(2,500)

Long Term Liabilities

 

 

(38,800)

(36,200)

(37,000)

(38,000)

Long term borrowings

0

0

0

0

Finance leases

(21,600)

(19,000)

(19,000)

(19,000)

Other long term liabilities

(17,200)

(17,200)

(18,000)

(19,000)

Net Assets

 

 

286,100

309,600

305,000

324,000

CASH FLOW

Operating Cash Flow

 

 

24,400

44,400

30,000

50,000

Net Interest

(7,200)

(1,400)

(400)

(300)

Tax

(200)

(300)

(2,000)

(200)

Capex

(10,400)

(9,400)

(10,200)

(11,000)

Acquisitions/disposals

(61,700)

(20,500)

(2,000)****

34,000*****

Financing

135,700

(7,700)

0

0

Dividends

(6,100)

(4,600)

(5,500)

(5,500)

Net Cash Flow

74,500

500

9,900

67,000

Opening net debt/(cash)

 

 

44,900

(29,600)

(30,100)

(40,000)

Finance leases initiated

0

0

0

0

Other

0

0

0

0

Closing net debt/(cash)

 

 

(29,600)

(30,100)

(40,000)

(107,000)

Source: Borussia Dortmund accounts, Edison Investment Research. Note: *Including estimated c €12m insurance claim benefit. **Early repayment of financial liabilities. ***Player asset write-down. ****Including acquisitions of Schürrle, Götze, Dembélé, Rode, Guerreiro, Isak and Mor and disposals of Mkhitaryan, Hummels and Gündogan. *****Including acquisition of Toprak and €40m from estimated €50m transfer revenue in FY18.

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been prepared and issued by Edison for publication globally. 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. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US 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. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and 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 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. This document is provided 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.
Edison has a restrictive policy relating to personal dealing. 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. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. 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. 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 (ie 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. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2017. “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.

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

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 8249 8342

Level 12, 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

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been prepared and issued by Edison for publication globally. 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. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US 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. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and 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 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. This document is provided 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.
Edison has a restrictive policy relating to personal dealing. 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. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. 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. 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 (ie 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. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2017. “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.

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

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 8249 8342

Level 12, 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

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Share this with friends and colleagues