While arguably riding its luck of late, Borussia Dortmund GmbH & Co KGaA (SIX:BVB) is well-placed to exploit immediate Bundesliga and Europa League opportunities. However, there is minimal room for error in terms of prized Champions League qualification, the driver of our forecast improvement in FY19 operational profit (in Bundesliga just four points separate the second place from sixth and BVB is ranked only fourth since the winter break). To its credit, BVB’s Q2 financial performance was much more assured than on the field, with steady revenue and slightly lower EBITDA without the buttress of transfers. The rise in our current-year forecast is due wholly to January transfers (notably Aubameyang), further proof of Dortmund’s ability to generate substantial hidden reserves.
Q2: A different kind of quarter
The three months to December saw a similar y-o-y fixture pattern but contrasting outcomes ie no Bundesliga wins until new coach Stöger joined late in the period and an equally poor Champions League (just two points against top of group table last time). This led to much lower (c 40%) broadcasting income from European competition, albeit fortuitously redeemed by the initial benefit of the new deal on domestic TV marketing. While advertising remained encouraging (up 7%), marked by new Champion Partners Opel and bwin, there was a further decline in merchandising (down 24%), which is common across the league. The shortfall in EBITDA (c €7m, relatively minor in full-year context) on flat revenue was due mainly to wage pressure, compounded by one-off severance costs related to the previous coach’s set-up.
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