Uncertain times continue

Borussia Dortmund 16 November 2020 Update
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Borussia Dortmund

Uncertain times continue

Q121 results

Travel & leisure

16 November 2020

Price

€5.2

Market cap

€478m

£0.9/€

Net debt (€m) at 30 September 2020

94.1

Shares in issue

92.0m

Free float

59.9%

Code

BVB

Primary exchange

Frankfurt

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

5.3

(13.4)

(38.3)

Rel (local)

4.8

(13.9)

(37.6)

52-week high/low

€9.39

€4.21

Business description

The group operates Borussia Dortmund, a leading football club, Bundesliga runners up in 2019/20, DFB Super Cup winners in 2019/20 and DFB Cup winners in 2016/17. The club has qualified for the Champions League in eight of the last 10 seasons.

Next events

H121 results

February 2021

Analysts

Russell Pointon

+44 (0)20 3077 5757

Neil Shah

+44 (0)20 3077 5715

Borussia Dortmund is a research client of Edison Investment Research Limited

Borussia Dortmund’s Q121 results were affected, as expected, by the delayed start to the 2020/21 season, and the severe restrictions on fan attendance at games as experienced towards the end of the prior season. The recent decision by federal and state governments to further restrict attendance at games, in response to the resurgence of COVID-19 in November, highlights the uncertain operating environment for the club. We currently retain our prior forecasts but our SOTP valuation reduces by 8% to €11.96/share.

Year end

Revenue (€m)

EBITDA (€m)

PBT*
(€m)

EPS*
(€)

DPS
(€)

P/E
(x)

EV/EBITDA
(x)

06/19

370.3

116.0

101.5

0.88

0.06

5.9

4.9

06/20

370.2

63.0

45.6

0.47

0.00

11.1

9.1

06/21e

336.2

39.5

23.0

0.25

0.00

20.8

14.5

06/22e

346.6

60.8

43.8

0.43

0.00

12.1

9.4

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

Q121: Delayed start to the new season

Due to the delayed start to the new football season, with fewer games played during Q121 (one home Bundesliga game) than the prior year (three home Bundesliga games and one Champions League game), and fan attendance at games severely restricted due to COVID-19, revenue declined by 46% y-o-y to €56.5m. All sources of revenue fell versus Q120 and the company reported an EBITDA loss of €9.3m. There was good control of costs, where possible. Total operating expenses fell by 20% y-o-y, within which personnel declined by 13%, including among the playing squad, and other operating expenses by 48%. The operating loss and net investment in the playing squad spend of €63m, albeit much lower than the Q120 investment of €116m, led to an increase in the net debt position of €94m vs €29m at the end of FY20. After seven games of the new season, to the date of the quarterly report, the team is third in the Bundesliga with 15 points, three points behind first-placed Bayern Munich.

FY21: Outlook remains uncertain

At this early stage of the season, and with a high level of uncertainty about when fans will be allowed to return to watch games, we retain our prior forecasts for FY21, as per our recent Outlook note. Following earlier trials to allow a restricted number of fans into the stadium, all games in November are to be played with no fans in attendance, and further disruptions due to COVID-19 are possible.

Valuation: SOTP valuation reduced to €11.96/share

Our SOTP valuation reduces to €11.96/share from €13.03 to reflect a number of changes: the higher net debt position vs June 2020; the May 2018 brand valuation is adjusted for recent changes in the share prices of quoted peers; and the estimated squad valuation (per Transfermarkt.com) of €587m is adjusted down by the average transfer costs (as a percentage of gross transfer fees) since FY19 of 9.4%.

Exhibit 1: Financial summary

€'k

2014

2015

2016

2017

2018

2019

2020

2021e

2022e

Year end 30 June

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue

 

 

256,280

263,601

281,261

328,375

313,310

370,256

370,196

336,239

346,606

Cost of Sales

(15,857)

(8,237)

69,322

51,388

202,639

(21,273)

(22,392)

(17,066)

(19,384)

Gross Profit

240,423

255,364

350,583

379,763

515,949

348,983

347,804

319,173

327,222

EBITDA

 

 

49,132

55,594

86,668

74,073

137,306

115,983

62,992

39,500

60,801

Normalised operating profit

 

 

40,976

46,025

75,798

62,597

126,150

103,160

49,050

25,205

46,326

Amortisation of acquired intangibles

(22,523)

(32,865)

(31,899)

(51,939)

(66,814)

(65,850)

(88,285)

(94,972)

(107,072)

Exceptionals

0

0

(7,469)

0

(20,362)

(13,809)

(3,903)

0

0

Reported operating profit

18,453

13,160

36,430

10,658

38,974

23,501

(43,138)

(69,767)

(60,746)

Net Interest

(3,889)

(7,159)

(2,104)

(1,567)

(4,336)

(1,705)

(3,444)

(2,233)

(2,483)

Joint ventures & associates (post tax)

27

0

8

28

13

13

(1)

0

0

Profit Before Tax (norm)

 

 

37,114

38,866

73,702

61,058

121,827

101,468

45,605

22,972

43,843

Profit Before Tax (reported)

 

 

14,591

6,001

34,334

9,119

34,651

21,809

(46,583)

(72,000)

(63,229)

Reported tax

(2,621)

(469)

(4,898)

(910)

(2,946)

(4,418)

2,630

0

(4,384)

Profit After Tax (norm)

30,447

35,828

63,188

54,965

111,469

80,913

43,030

22,972

39,458

Profit After Tax (reported)

11,970

5,532

29,436

8,209

31,705

17,391

(43,953)

(72,000)

(67,613)

Minority interests

(310)

(281)

(245)

0

0

0

0

0

0

Net income (normalised)

30,137

35,547

62,943

54,965

111,469

80,913

43,030

22,972

39,458

Net income (reported)

11,660

5,251

29,191

8,209

31,705

17,391

(43,953)

(72,000)

(67,613)

Average number of shares outstanding (m)

61.4

92.0

92.0

92.0

92.0

92.0

92.0

92.0

92.0

EPS - normalised (c)

 

 

49.06

38.64

68.42

59.74

121.16

87.95

46.77

24.97

42.89

EPS - diluted normalised (€)

 

 

0.49

0.39

0.68

0.60

1.21

0.88

0.47

0.25

0.43

EPS - basic reported (€)

 

 

0.19

0.06

0.32

0.09

0.34

0.19

(0.48)

(0.78)

(0.73)

Dividend (€)

0.10

0.05

0.06

0.06

0.06

0.06

0.00

0.00

0.00

Revenue growth (%)

1.1

2.9

6.7

16.8

(-4.6)

18.2

(-0.0)

(-9.2)

3.1

Gross Margin (%)

93.8

96.9

124.6

115.6

164.7

94.3

94.0

94.9

94.4

EBITDA Margin (%)

19.2

21.1

30.8

22.6

43.8

31.3

17.0

11.7

17.5

Normalised Operating Margin

16.0

17.5

26.9

19.1

40.3

27.9

13.2

7.5

13.4

BALANCE SHEET

Fixed Assets

 

 

249,492

289,509

302,765

354,858

351,405

371,715

441,455

390,189

329,642

Intangible Assets

61,602

96,340

65,278

141,521

120,342

163,710

229,667

189,695

137,624

Tangible Assets

184,502

189,518

188,423

184,664

180,693

184,001

193,037

181,742

173,267

Investments & other

3,388

3,651

49,064

28,673

50,370

24,004

18,751

18,751

18,751

Current Assets

 

 

42,803

97,030

121,780

123,739

134,207

128,356

76,512

44,802

35,413

Stocks

5,921

9,376

10,158

8,978

5,588

4,569

6,754

5,148

5,847

Debtors

14,923

29,680

51,072

48,776

22,981

30,061

36,520

33,170

34,193

Cash & cash equivalents

17,852

53,739

51,722

49,297

59,464

55,865

3,317

(23,436)

(34,548)

Other

4,107

4,235

8,828

16,688

46,174

37,861

29,921

29,921

29,921

Current Liabilities

 

 

(71,014)

(61,627)

(78,811)

(140,912)

(119,026)

(125,388)

(122,609)

(111,633)

(109,310)

Creditors

(59,927)

(58,327)

(69,587)

(128,707)

(113,949)

(119,779)

(110,188)

(89,212)

(86,889)

Tax and social security

(571)

(803)

(5,212)

(732)

(1,962)

(811)

(40)

(40)

(40)

Short term borrowings

(8,889)

0

0

0

0

0

(8,031)

(18,031)

(18,031)

Finance leases

(1,627)

(2,497)

(2,640)

(10,295)

(1,969)

(3,127)

(4,350)

(4,350)

(4,350)

Other

0

0

(1,372)

(1,178)

(1,146)

(1,671)

0

0

0

Long Term Liabilities

 

 

(76,032)

(38,834)

(36,192)

(25,383)

(23,001)

(19,764)

(89,911)

(89,911)

(89,911)

Long term borrowings

(32,139)

0

0

0

0

0

0

0

0

Finance leases

(20,142)

(21,630)

(18,990)

(8,695)

(6,726)

(8,381)

(20,054)

(20,054)

(20,054)

Other long term liabilities

(23,751)

(17,204)

(17,202)

(16,688)

(16,275)

(11,383)

(69,857)

(69,857)

(69,857)

Net Assets

 

 

145,249

286,078

309,542

312,302

343,585

354,919

305,447

233,447

165,834

Minority interests

(334)

(305)

0

0

0

0

0

0

0

Shareholders' equity

 

 

144,915

285,773

309,542

312,302

343,585

354,919

305,447

233,447

165,834

CASH FLOW

Op Cash Flow before WC and tax

45,270

48,435

84,572

72,534

132,983

111,914

59,547

37,266

58,318

Working capital

(6,672)

(20,851)

29,052

31,488

(9,402)

5,673

(18,011)

(16,020)

(4,045)

Exceptional & other

(4,649)

(3,193)

(76,641)

13,868

52,171

(84,587)

(38,877)

(37,767)

(47,517)

Tax

(3,879)

(200)

(320)

(5,476)

(1,723)

(2,834)

305

0

(4,384)

Operating cash flow

 

 

30,070

24,191

36,663

112,414

174,029

30,166

2,964

(16,520)

2,372

Capex

(10,923)

(10,399)

(9,442)

(8,139)

(7,195)

(9,872)

(6,143)

(3,000)

(6,000)

Net investment in intangibles

2,058

(61,682)

(20,038)

(96,526)

(135,556)

(13,643)

(44,646)

(15,000)

(5,000)

Acquisitions/disposals

0

0

(500)

(45)

0

0

0

0

0

Net interest

(3,644)

(7,244)

(1,435)

(2,002)

(3,668)

(1,456)

(3,326)

(2,233)

(2,483)

Equity financing

5

140,708

1

0

0

0

0

0

0

Dividends

(6,523)

(6,451)

(5,124)

(5,519)

(5,519)

(5,519)

(5,519)

0

0

Other

(5,727)

(43,236)

(2,142)

(2,608)

(11,924)

(3,275)

4,122

10,000

0

Net Cash Flow

5,316

35,887

(2,017)

(2,425)

10,167

(3,599)

(52,548)

(26,753)

(11,111)

Opening net debt/(cash)

 

 

53,932

44,945

(29,612)

(30,092)

(30,307)

(50,769)

(44,357)

29,118

65,871

Other non-cash movements

3,671

38,670

2,497

2,640

10,295

(2,813)

(20,927)

(10,000)

0

Closing net debt/(cash)

 

 

44,945

(29,612)

(30,092)

(30,307)

(50,769)

(44,357)

29,118

65,871

76,983

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.

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 2020 Edison Investment Research Limited (Edison).

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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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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.

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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

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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 2020 Edison Investment Research Limited (Edison).

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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 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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