Borussia Dortmund’s Q123 results demonstrated the expected recovery in its more variable revenue streams as the club welcomed the return of more fans to the stadium versus the COVID-19-affected Q122. The return to normality was also reflected in a relatively busy transfer window in the summer with five player additions and three sales, involving a transfer fee. The team’s performance on the pitch is consistent with our existing financial estimates, therefore we make no changes to our forecasts. Our asset-backed sum-of the-parts valuation is unchanged at €10.50 per share.

Borussia Dortmund is one of the most successful football clubs in Europe. It has a consistent record of success in its domestic league, which enables it to participate regularly in the financially lucrative European competitions. It is well positioned to benefit from structural growth drivers of growing global interest in football, which should enable it to continue growing its multiple revenue streams domestically and in international markets. After a relatively disappointing sporting performance and some unexpected disruption due to COVID-19 in FY22, management expects a strong financial recovery in FY23. Continued profit momentum with relatively good visibility on a number of revenue streams, unlike many other consumer-facing business, is attractive given Borussia Dortmund’s valuation multiples are low relative to its own history. It continues to look well supported by our asset-backed valuation of €10.50 per share.

Borussia Dortmund’s football season finished on 14 May 2022 with another (comfortable) second place in the Bundesliga confirming qualification for the Champions League in the 2022/23 season. Management’s reiterated guidance for FY22, a net loss of €17–24m, represents a robust performance given the restrictions on fan attendance for the majority of the year and a less successful season in European competitions than is typical. The company is well-placed to deliver an improved financial performance in FY22/23 if further COVID-19 related restrictions can be avoided. Our valuation of €9.8/share suggests significant upside in a normalised operating environment.

Borussia Dortmund’s Q222 results were affected by the imposition of new COVID-related restrictions towards the end of the period. Following the period end, the team was eliminated from the Europa League, having failed to qualify for the Champions League knockout stages before Christmas. Against this backdrop, the small downgrade in management guidance for FY22 profitability is testimony to the tight management of costs. The team is currently (comfortably) placed second in the Bundesliga so all will be looking forward to a more successful and profitable FY23. Our sum-of-the-parts valuation reduces to €11 per share.

Borussia Dortmund has an established track record as one of the most successful football clubs in Europe. This enables it to exploit structural tailwinds, increasing global and multi-media coverage, to drive long-term revenue growth. FY21 was a challenging year financially due to the negative effects of COVID-19 related restrictions, but the team was relatively successful including winning major silverware and guaranteed participation in the financially lucrative Champions League in FY22. The phased return of fans to the stadium through FY22 should lead to better financial results. The share price weakness has led to it trading at recent low multiples and well below our sum-of-the-parts valuation of €11.56/share.

Borussia Dortmund’s FY21 preliminary results are slightly above management’s expectations at the EBITDA level and testimony to how well the cost base has been managed given the on-off expectations through the season about the return of fans to the stadium. The challenging year has led to an increase in the company’s net debt position, unusual for a club that is conservatively run from a financial perspective, but recent transfer activity and higher match attendance should lead to an improved financial position through FY22. Our FY22 forecasts are unchanged ahead of the publication of the full financial statements on 28 September 2021.