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Research: Consumer
Borussia Dortmund
Borussia Dortmund |
Hitting form |
Half-year results |
Travel & leisure |
16 March 2017 |
Share price performance
Business description
Next events
Analysts
Borussia Dortmund is a client of Edison Investment Research Limited |
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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* |
PBT** |
EPS** |
DPS |
EV/EBITDA |
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.
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Research: Consumer
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