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Research: Consumer
Borussia Dortmund’s headline (income statement) results for FY23 were ahead of management’s previous guidance and our estimates. The company enjoyed a year of recovery following the disruption of COVID-19 in the prior year and the first team enjoyed better sporting success than the previous season, although it fell agonisingly short of winning the Bundesliga. We will update our underlying FY24 estimates when the full financial statements are published at the end of September 2023 but, in the interim, we include part of the disclosed transfer profit on the recent sale of Jude Bellingham.
Borussia Dortmund |
Exceeded FY23 guidance and our estimates |
FY23 headline results |
Travel and leisure |
23 August 2023 |
Share price performance
Business description
Next events
Analysts
Borussia Dortmund is a research client of Edison Investment Research Limited |
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Borussia Dortmund’s headline (income statement) results for FY23 were ahead of management’s previous guidance and our estimates. The company enjoyed a year of recovery following the disruption of COVID-19 in the prior year and the first team enjoyed better sporting success than the previous season, although it fell agonisingly short of winning the Bundesliga. We will update our underlying FY24 estimates when the full financial statements are published at the end of September 2023 but, in the interim, we include part of the disclosed transfer profit on the recent sale of Jude Bellingham.
Year end |
Revenue (€m) |
EBITDA |
PBT* |
EPS* |
DPS |
P/E |
EV/EBITDA |
06/21 |
334.2 |
39.0 |
24.3 |
0.26 |
0.0 |
16.4 |
12.4 |
06/22 |
351.6 |
83.8 |
66.4 |
0.67 |
0.0 |
6.5 |
5.8 |
06/23e |
418.2** |
123.2** |
96.2 |
0.80 |
0.0 |
5.4 |
3.9 |
06/24e |
420.5 |
165.2 |
150.9 |
1.26 |
0.0 |
3.4 |
2.9 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments. FY22 and FY23 adjusted for recent disclosure **Disclosed.
Post-COVID-19 recovery
Borussia Dortmund reported FY23 revenue of €418.2m (versus management’s guidance of €394m), EBITDA of €123.2m (guidance of €101–106m) and net profit of €9.6m (guidance of €2–7m). All figures demonstrated good year-on-year growth from FY22: revenue +19%, EBITDA +47% and net income improved from a loss of €31.9m. The news release included restatement of some of the prior year’s figures. Match Operations, Advertising, TV Marketing, and Conference, Catering & Miscellaneous were ahead of our prior estimates by 9%, 5%, 4% and 23%, but Merchandising was 5% lower. On the cost side, all disclosed expenses were higher than our previous forecasts by mid-single digits.
FY24 profit upgraded for part of transfer gain
In the absence of full financial statements for FY23, we have yet to make any changes to our underlying estimates for FY24 to reflect the FY23 outperformance versus our prior estimates (revenue +6% and EBITDA +16%). In June 2023, management announced the expected transfer, which was subsequently completed at the start of the FY24 accounting period, of Jude Bellingham to Real Madrid CF would positively affect FY24 EBITDA and EBIT by €77m on the initial fixed transfer fee of €103m. We have provisionally increased our FY24 profit estimates by €45m to allow for some incremental investment from the indicated gain. We highlight that future years may benefit from variable compensation of up to 30% of the initial fixed proceeds, dependent on the player’s and club’s success in the next six seasons.
Valuation: Discount to sum-of-the-parts remains
Our asset-backed sum-of-the-parts valuation reduces to €11.3 per share (€12/share previously) as we update only for changes in squad valuations.
Exhibit 1: Financial summary
€m |
2020 |
2021 |
2022 |
2023e |
2024e |
||
Year end 30 June |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
INCOME STATEMENT |
|||||||
Revenue |
|
|
370.2 |
334.2 |
351.6 |
418.2 |
420.5 |
Cost of Sales |
(22.4) |
(19.6) |
(22.6) |
(25.4) |
(26.3) |
||
Gross Profit |
347.8 |
314.6 |
329.0 |
392.8 |
394.2 |
||
EBITDA |
|
|
63.0 |
39.0 |
83.8 |
123.2 |
165.2 |
Operating profit (before amort. and excepts.) |
|
|
49.1 |
25.3 |
70.6 |
102.3 |
151.3 |
Amortisation of acquired intangibles |
(88.3) |
(92.6) |
(87.5) |
(85.4) |
(93.9) |
||
Exceptionals |
(3.9) |
(4.8) |
(9.1) |
0.0 |
0.0 |
||
Reported operating profit |
(43.1) |
(72.1) |
(26.0) |
16.9 |
57.3 |
||
Net Interest |
(3.4) |
(1.1) |
(4.2) |
(6.1) |
(0.3) |
||
Joint ventures & associates (post tax) |
(0.0) |
0.1 |
0.1 |
0.0 |
0.0 |
||
Profit Before Tax (norm) |
|
|
45.6 |
24.3 |
66.4 |
96.2 |
150.9 |
Profit Before Tax (reported) |
|
|
(46.6) |
(73.2) |
(30.2) |
10.8 |
57.0 |
Reported tax |
2.6 |
0.3 |
(1.7) |
(1.2) |
0.0 |
||
Profit After Tax (norm) |
43.0 |
24.2 |
70.1 |
88.5 |
138.9 |
||
Profit After Tax (reported) |
(44.0) |
(72.8) |
(31.9) |
9.6 |
57.0 |
||
Minority interests |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Net income (normalised) |
43.0 |
24.2 |
70.1 |
88.5 |
138.9 |
||
Net income (reported) |
(44.0) |
(72.8) |
(31.9) |
9.6 |
57.0 |
||
Average Number of Shares Outstanding (m) |
92.0 |
92.0 |
105.4 |
110.4 |
110.4 |
||
EPS - normalised (c) |
|
|
46.8 |
26.3 |
66.5 |
80.2 |
125.8 |
EPS - normalised fully diluted (c) |
|
|
46.8 |
26.3 |
66.5 |
80.2 |
125.8 |
EPS - basic reported (€) |
|
|
(0.48) |
(0.79) |
(0.30) |
0.09 |
0.52 |
Dividend (€) |
0.00 |
0.00 |
0.00 |
0.00 |
0.00 |
||
Revenue growth (%) |
(0.0) |
(9.7) |
5.2 |
18.9 |
0.5 |
||
Gross Margin (%) |
94.0 |
94.1 |
93.6 |
93.9 |
93.7 |
||
EBITDA Margin (%) |
17.0 |
11.7 |
23.8 |
29.5 |
39.3 |
||
Normalised Operating Margin (%) |
13.2 |
7.6 |
20.1 |
24.5 |
36.0 |
||
BALANCE SHEET |
|||||||
Fixed Assets |
|
|
441.5 |
389.8 |
358.4 |
364.4 |
355.6 |
Intangible Assets |
229.7 |
193.4 |
124.4 |
132.0 |
131.1 |
||
Tangible Assets |
193.0 |
183.5 |
172.5 |
170.8 |
162.9 |
||
Investments & other |
18.8 |
12.9 |
61.6 |
61.6 |
61.6 |
||
Current Assets |
|
|
76.5 |
60.7 |
96.6 |
103.0 |
140.4 |
Stocks |
6.8 |
6.8 |
4.4 |
4.4 |
4.4 |
||
Debtors |
36.5 |
29.9 |
45.8 |
49.8 |
49.8 |
||
Cash & cash equivalents |
3.3 |
1.7 |
10.6 |
12.9 |
50.3 |
||
Other |
29.9 |
22.2 |
35.8 |
35.8 |
35.8 |
||
Current Liabilities |
|
|
(122.6) |
(163.6) |
(130.6) |
(133.1) |
(133.1) |
Creditors |
(110.2) |
(100.1) |
(125.9) |
(132.9) |
(132.9) |
||
Tax and social security |
(0.0) |
(0.0) |
(0.0) |
(0.0) |
(0.0) |
||
Short term borrowings |
(8.0) |
(56.9) |
0.0 |
0.0 |
0.0 |
||
Finance leases |
(4.4) |
(4.2) |
(4.6) |
(0.1) |
(0.1) |
||
Other |
0.0 |
(2.3) |
0.0 |
0.0 |
0.0 |
||
Long Term Liabilities |
|
|
(89.9) |
(54.3) |
(44.0) |
(44.0) |
(39.5) |
Long term borrowings |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Finance leases |
(20.1) |
(16.8) |
(12.5) |
(12.5) |
(12.5) |
||
Other long-term liabilities |
(69.9) |
(37.5) |
(31.4) |
(31.4) |
(26.9) |
||
Net Assets |
|
|
305.4 |
232.6 |
280.5 |
290.4 |
323.4 |
Minority interests |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Shareholders' equity |
|
|
305.4 |
232.6 |
280.5 |
290.4 |
323.4 |
CASH FLOW |
|||||||
Operating Cash Flow |
59.5 |
37.9 |
76.6 |
117.1 |
164.9 |
||
Working capital |
(18.0) |
(6.9) |
16.3 |
(4.0) |
0.0 |
||
Exceptional & other |
(38.9) |
(13.6) |
(57.5) |
(59.4) |
(128.7) |
||
Tax |
0.3 |
0.0 |
0.0 |
(1.2) |
0.0 |
||
Net operating cash flow |
|
|
3.0 |
17.4 |
35.4 |
52.5 |
36.2 |
Capex |
(6.1) |
(3.4) |
(1.7) |
(12.0) |
(6.0) |
||
Net investment in intangibles |
(44.6) |
(58.6) |
(49.4) |
(33.0) |
12.0 |
||
Acquisitions/disposals |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Net interest |
(3.3) |
(1.4) |
(0.3) |
(0.6) |
(0.3) |
||
Equity financing |
0.0 |
0.0 |
86.5 |
0.0 |
0.0 |
||
Dividends |
(5.5) |
0.0 |
0.0 |
0.0 |
0.0 |
||
Other |
(3.9) |
52.5 |
(61.6) |
(4.5) |
(4.5) |
||
Net Cash Flow |
(60.6) |
6.4 |
8.8 |
2.4 |
37.4 |
||
Opening net debt/(cash) |
|
|
(44.4) |
29.1 |
76.2 |
6.6 |
(0.3) |
Other non-cash movements |
(12.9) |
(53.6) |
60.8 |
4.5 |
0.0 |
||
Closing net debt/(cash) |
|
|
29.1 |
76.2 |
6.6 |
(0.3) |
(37.6) |
Source: Borussia Dortmund accounts, Edison Investment Research. Note: FY22 and FY23 restated for recent disclosure.
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|
Research: Investment Companies
Henderson Smaller Companies Investment Trust (HSL) is managed by Neil Hermon, who has been at the helm for more than 20 years. While FY23, ending 31 May, was a difficult year as growth stocks derated in an environment of rising interest rates and bond yields, this should be put into context as the manager has outperformed the trust’s benchmark in 16 of the last 20 years. Hermon believes that there is a disconnect between portfolio companies’ valuations and the strength of their operations as, faced with higher input costs, businesses have adapted to protect their margins. The manager has taken the opportunity of share price weakness to add some new high-quality names to the portfolio, which would have previously been disregarded on valuation grounds. HSL is now one of just 20 funds designated as an AIC dividend hero.