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EUR339m
Research: Consumer
Immediate back-to-back Bundesliga wins under new coach Peter Stöger is at least a welcome change of fortune for beleaguered Dortmund. Now the winter break allows for renewed stability and the return of key players. The team remains very much in the mix for UEFA competition next season, while a deep run in the current Europa League may significantly make up for a premature Champions League exit, as evident in our newly-introduced minor downgrades. Recent Q1 results show the success of Dortmund’s transfer policy, which is generating substantial hidden reserves in player values. Quarterly EBITDA of €81.4m, driven by the remarkable sale of Dembélé to Barcelona, provides ample scope for reinvestment and alone all but guarantees a record outturn this year.
Borussia Dortmund |
Christmas comes early |
Update |
Travel & leisure |
19 December 2017 |
Share price performance
Business description
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Analysts
Borussia Dortmund is a client of Edison Investment Research Limited |
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Immediate back-to-back Bundesliga wins under new coach Peter Stöger is at least a welcome change of fortune for beleaguered Dortmund. Now the winter break allows for renewed stability and the return of key players. The team remains very much in the mix for UEFA competition next season, while a deep run in the current Europa League may significantly make up for a premature Champions League exit, as evident in our newly-introduced minor downgrades. Recent Q1 results show the success of Dortmund’s transfer policy, which is generating substantial hidden reserves in player values. Quarterly EBITDA of €81.4m, driven by the remarkable sale of Dembélé to Barcelona, provides ample scope for reinvestment and alone all but guarantees a record outturn this year.
Year end |
Revenue* (€m) |
EBITDA |
PBT** |
EPS** |
DPS |
EV/EBITDA |
06/16 |
281.3 |
86.7 |
73.8 |
0.68 |
0.06 |
6.3 |
06/17 |
328.4 |
74.1 |
61.1 |
0.56 |
0.06 |
7.4 |
06/18e |
335.0 |
98.0 |
83.0 |
0.77 |
0.06 |
5.2 |
06/19e |
378.0 |
94.0 |
80.0 |
0.74 |
0.07 |
5.2 |
Note: *Before player transfer income. **EPS is normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Après Champions League, pas de déluge!
Despite disappointment at Dortmund’s recent dip in form, the financial implications may not be significant, assuming progress in the Europa League (we look for round of 16) and top-four qualification for next season’s Champions League (currently third in Bundesliga, albeit in a very tight race). As detailed on page 2, the reduction now in our FY18 gross EBITDA forecast is just €4m (from €102m to €98m) on €5m lower pre-transfer revenue, primarily broadcasting. The projected halving of EBITDA for the rest of this period reasonably reflects a near double-digit rise in costs on flat revenue. Risk to all this is epitomised by a new coach, whose contract is only to the season end, but so far, so good. A win against Bayern in the imminent DFB Cup tie would be an unexpected bonus to our numbers.
Reassurance from hidden reserves
Sporting Director Michael Zorc’s new admission of the challenge of squad planning in the face of shortening player retention (hitherto about five years) is also confirmation of Dortmund’s sustained ability to generate high levels of transfer income as emerging talent attracts the attention of major clubs at ever younger ages. While exceptional and at some sporting detriment, Q1’s Dembélé deal underpins current year financials with more to follow.
Valuation: Chance to regroup
On-field stabilisation may allow renewed appreciation of Dortmund’s riches (the Dembélé move alone fuelled a 40% share price rise in early season). Given the scale of the remaining surplus of market value to net player assets (c €240m per www.transfermarkt.de) and endemic lively player transfer inflation, we do not expect market speculation to abate.
Revenue and profit analysis
Exhibit 1: Revenue and profit analysis
Year end June (€m) |
Q117 |
Q2-Q417 |
FY17 |
Q118 |
Q2-Q418e |
FY18e |
FY19e |
▲ |
▲ |
▲▲ |
|||||
Home matches: |
|||||||
Bundesliga |
3 |
14 |
17 |
3 |
14 |
17 |
17 |
Champions League |
1 |
4 |
5 |
1 |
2 |
3 |
4 |
Europa League |
- |
- |
- |
- |
2 |
2 |
- |
DFB Cup |
- |
2 |
2 |
- |
- |
- |
2 |
SuperCup |
1 |
- |
1 |
1 |
- |
1 |
- |
Away matches: |
|||||||
Champions League |
1 |
4 |
5 |
1 |
2 |
3 |
4 |
Europa League |
- |
- |
- |
- |
2 |
2 |
- |
DFB Cup |
1 |
2+final |
3+final |
1 |
2 |
3 |
3 |
Revenue |
|||||||
Match operations: |
|||||||
Bundesliga |
4.7e |
22.3e |
27.0 |
4.8e |
22.2 |
27.0 |
27.5 |
Champions League |
1.9e |
7.6e |
9.5 |
2.0e |
4.0 |
6.0 |
8.0 |
Europa League |
- |
- |
- |
- |
4.0 |
4.0 |
- |
DFB Cup/SuperCup |
1.1e |
4.2e |
5.3 |
1.2e |
0.3 |
1.5 |
3.5 |
Other |
0.8e |
1.4e |
2.2 |
2.6e |
1.9 |
4.5 |
2.5 |
Total |
8.5 |
35.4 |
43.9 |
10.6 |
32.4 |
43.0 |
41.5 |
Broadcasting: |
|||||||
Bundesliga |
16.2 |
49.9 |
66.1 |
21.6 |
68.4 |
90.0 |
95.0 |
Champions League |
19.6 |
30.5 |
50.1 |
18.9 |
11.1 |
30.0 |
68.0 |
Europa League |
0.9 |
- |
0.9 |
- |
4.0 |
4.0 |
- |
DFB Cup/SuperCup |
1.6 |
7.0 |
8.6 |
1.8 |
1.2 |
3.0 |
4.5 |
Total |
38.3 |
87.5 |
125.8 |
42.3 |
84.7 |
127.0 |
167.5 |
Advertising |
17.8 |
69.6 |
87.4 |
21.3 |
74.7 |
96.0 |
99.0 |
Merchandising |
9.2 |
30.3 |
39.5 |
8.7 |
28.3 |
37.0 |
37.0 |
Catering / other |
7.8 |
24.1 |
31.9 |
5.8 |
26.2 |
32.0 |
33.0 |
Revenue before transfers |
81.6 |
246.8 |
328.4 |
88.7 |
246.3 |
335.0 |
378.0 |
Transfers |
45.2* |
32.1 |
77.3 |
136.1** |
33.9 |
170.0 |
82.0*** |
Total revenue |
126.8 |
278.9 |
405.7 |
224.8 |
280.2 |
505.0 |
460.0 |
Other operating income |
1.0 |
3.2 |
4.2 |
0.5 |
2.5 |
3.0 |
4.0 |
Labour costs |
(38.4) |
(139.5) |
(177.9) |
(43.9) |
(151.1) |
(195.0) |
(205.0) |
Share of revenue before transfers |
47% |
56% |
54% |
49% |
61% |
58% |
54% |
Material costs |
(5.8) |
(20.1) |
(25.9) |
(5.6) |
(18.4) |
(24.0) |
(25.0) |
Other operating costs |
(43.4) |
(88.6) |
(132.0) |
(94.4) |
(96.6) |
(191.0) |
(140.0) |
EBITDA |
40.1 |
34.0 |
74.1 |
81.4 |
16.6 |
98.0 |
94.0 |
Source: Edison Investment Research. Note: ▲ Assuming Europa League Round of 16 on transfer from Champions League and DFB Cup Round of 16. ▲▲ Assuming Champions League Round of 16 and DFB Cup semi-final. *Including disposal of Mkhitaryan. **Including disposals of Dembélé, Bender, Merino and Mor. ***Notional (assumed average of transfer revenue of three previous years excluding “exceptional” Dembélé transaction).
Exhibit 2: Financial summary
€'000s |
2016 |
2017 |
2018e |
2019e |
||
June |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
||||||
Revenue |
|
|
376,300 |
405,700 |
505,000 |
460,000 |
EBITDA |
|
|
86,700 |
74,100 |
98,000 |
94,000 |
Operating Profit (before amort. and except.) |
75,900 |
62,600 |
86,000 |
82,000 |
||
Intangible Amortisation |
(32,000) |
(51,900) |
(64,000) |
(65,000) |
||
Exceptionals |
(7,500) |
(100) |
(1,100) |
0 |
||
Other |
0 |
0 |
0 |
0 |
||
Operating Profit |
36,400 |
10,600 |
20,900 |
17,000 |
||
Net Interest |
(2,100) |
(1,500) |
(3,000) |
(2,000) |
||
Other financial items |
0 |
0 |
0 |
0 |
||
Profit Before Tax (norm) |
|
|
73,800 |
61,100 |
83,000 |
80,000 |
Profit Before Tax (FRS 3) |
|
|
34,300 |
9,100 |
17,900 |
15,000 |
Tax |
(4,900) |
(900) |
(3,500) |
(2,500) |
||
Profit After Tax (norm) |
62,700 |
51,900 |
70,500 |
68,000 |
||
Profit After Tax (FRS 3) |
29,400 |
8,200 |
14,400 |
12,500 |
||
Minority interests |
0 |
0 |
0 |
0 |
||
Net income (normalised) |
62,700 |
51,900 |
70,500 |
68,000 |
||
Profit after tax (FRS3) |
29,400 |
8,200 |
14,400 |
12,500 |
||
Average Number of Shares Outstanding (m) |
92.0 |
92.0 |
92.0 |
92.0 |
||
EPS - normalised (c) |
|
|
68.2 |
56.4 |
76.6 |
73.9 |
EPS - (IFRS) (c) |
|
|
32.0 |
8.9 |
15.7 |
13.6 |
Dividend per share (c) |
6.0 |
6.0 |
6.0 |
7.0 |
||
EBITDA Margin (%) |
23.0 |
18.3 |
19.4 |
20.4 |
||
Operating Margin (before GW and except.) (%) |
20.2 |
15.4 |
17.0 |
17.8 |
||
BALANCE SHEET |
||||||
Fixed Assets |
|
|
302,800 |
354,900 |
330,000 |
308,000 |
Intangible Assets |
65,300 |
141,500 |
120,000 |
100,000 |
||
Tangible Assets |
188,400 |
184,700 |
182,000 |
180,000 |
||
Investments |
49,100 |
28,700 |
28,000 |
28,000 |
||
Current Assets |
|
|
121,800 |
123,700 |
145,000 |
169,000 |
Stocks |
10,200 |
9,000 |
10,000 |
10,000 |
||
Debtors |
51,100 |
48,800 |
50,000 |
50,000 |
||
Cash |
51,700 |
49,300 |
81,000 |
102,000 |
||
Other |
8,800 |
16,600 |
4,000 |
7,000 |
||
Current Liabilities |
|
|
(78,800) |
(140,900) |
(127,000) |
(125,000) |
Creditors |
(76,200) |
(130,600) |
(117,000) |
(115,000) |
||
Short term borrowings |
0 |
0 |
0 |
0 |
||
Finance leases |
(2,600) |
(10,300) |
(10,000) |
(10,000) |
||
Long Term Liabilities |
|
|
(36,200) |
(25,400) |
(27,000) |
(25,000) |
Long term borrowings |
0 |
0 |
0 |
0 |
||
Finance leases |
(19,000) |
(8,700) |
(8,000) |
(8,000) |
||
Other long term liabilities |
(17,200) |
(16,700) |
(19,000) |
(17,000) |
||
Net Assets |
|
|
309,600 |
312,300 |
321,000 |
327,000 |
CASH FLOW |
||||||
Operating Cash Flow |
|
|
44,400 |
12,200 |
5,200 |
31,000 |
Net Interest |
(1,400) |
(2,000) |
(2,000) |
(2,200) |
||
Tax |
(300) |
(5,500) |
(6,000) |
(6,000) |
||
Capex |
(9,400) |
(8,100) |
(9,000) |
(9,300) |
||
Acquisitions/disposals |
(20,500) |
9,100 |
50,000 |
13,000 |
||
Financing |
(7,700) |
0 |
0 |
0 |
||
Dividends |
(4,600) |
(5,500) |
(5,500) |
(5,500) |
||
Net Cash Flow |
500 |
200 |
32,700 |
21,000 |
||
Opening net debt/(cash) |
|
|
(29,600) |
(30,100) |
(30,300) |
(63,000) |
Finance leases initiated |
0 |
0 |
0 |
0 |
||
Other |
0 |
0 |
0 |
0 |
||
Closing net debt/(cash) |
|
|
(30,100) |
(30,300) |
(63,000) |
(84,000) |
Source: Source: Borussia Dortmund accounts, Edison Investment Research
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|
Research: Energy & Resources
On 12 December 2017, we visited the Aoka Mizu FPSO at Drydocks World Dubai, and had the opportunity to meet a number of Hurricane Energy and Bluewater employees. We returned with greater confidence in Hurricane’s ability to mobilise the Aoka Mizu to location in Q218 and to deliver first oil in H119. While some risk remains relating to weather-critical items, we feel that the risk of schedule slippage is lower than we had previously assumed. We bring first oil forward by six months in our updated valuation; this is offset by a slightly more conservative view of production ramp-up and uptime assumption in the first six months of production.