Racing Point reports £116m loss in first F1 year

The Racing Point Formula 1 team posted a loss of £116m in its first year of operation, but the figures reflect the unusual circumstances of its emergence from the ashes of Force India, and the true operating loss was closer to £25m.

Racing Point reports £116m loss in first F1 year

The higher number has been revealed in the newly published first year accounts for Racing Point, which was established as a new company in August 2018 after Force India went into administration.

Because of that timing, the accounts run from August 2018 to August 2019, whereas usually F1 teams operate in calendar years from January to December, thus fully reflecting the income and costs associated with individual racing seasons. The Racing Point accounts include the final nine races of 2018, and the first 12 of 2019.

The figures reflect the fact that Racing Point paid £90m to acquire the rights and assets associated with the original Force India team, and that the new team also took on the debts of the original company, so that creditors could be paid immediately – and the team would then subsequently be refunded when the administration process was complete.

The accounts also confirm that Stroll provided £142m of the total of £200m share capital, and thus the Canadian owns 71% of the shares, with the rest split between his fellow investors in the consortium he put together.

Income for the period is listed at just £46m – substantially less than the £77m featured in the last published Force India accounts in 2016 – because of the way revenue has been allocated as a result of acquiring the rights to Force India’s F1 prize fund earnings.

The notes to the accounts also confirm that subsequent to the 2018-’19 period a bank loan of £55m was repaid in January 2020, while a £40m installment of share capital was paid in December 2019.

Team principal Otmar Szafnauer stressed that the significant loss on paper did not reflect the true financial picture of Racing Point.

“These accounts are extraordinary and one time only because of the purchase of the team,” he told Motorsport.com.

“So when we're back into a normal accounting cycle you'll never see numbers like this again. This accounting period is an anomaly. It's not normal, so therefore you have to understand the numbers.

“And if we weren't in a position where the team was purchased out of administration, I think our loss would have been £25m in a normal year, not £116m.”

Read Also:

Szafnauer said the fact that a well-run team with good backing still lost a notional £25m indicated that the new Concorde Agreement has to provide an even fairer distribution of income than is currently being tabled.

“It's really, really important for F1 to get the money redistribution right such that a team like ours can have a chance of breaking even,” he said.

“That £25 million in the future should be around zero. So a team like ours can actually run. Remember, we're the most efficient team, we spend the least amount of money still today.

“So for a team that spends the least amount of money, has decent revenue, and is £25m in the hole, that isn't great. So therefore, the money distribution and the cost cap are important to the financial stability in F1. It's getting close to what we want, but it could be better. The upside could be better.

“Financially we're on a much stronger footing than we were as Force India. We don't have to worry about cash flows, paying people, paying for parts, none of that. However, to be able to race at the level we're racing, the cost cap and new money distribution are really important for the health of a mid-grid team like ours.”

Racing Point’s chief financial officer Robert Yeowart stressed that there were exceptional circumstances associated with the team’s first year.

“If you look at the balance sheet, a lot of those figures are heavily inflated because of post administration topics that would go away and never be seen again,” Yeowart told Motorsport.com.

“So when you see the accounts for all of 2020, they will be gone. When we do the accounts in August 2020, the balance sheet will look a lot more normal.

“For example the acquisition was done in such an accelerated way, and we stepped into the shoes of all of the creditors of Force India.

"So for example, we have over £30m in the debtors’ figure which is money that we paid out of this company to pay the creditors of Force India, which we then claim back off the administrators of Force India. By the time we get to August 2020, that's all dealt with, we've sorted all of that out.

“There's also a huge backlog in certain infrastructure costs. IT for example, was under-resourced, two or three years, and actually at breaking point. So in year one, we had to spend a lot on some of those things.”

Yeowart said that overall the business is operating as planned when Stroll and his partners established it, but there’s still a reliance on better income distribution.

“They've capitalised the business, they've put £200m of share capital into the business, which came from a five-year business plan,” he said. “We knew that there would be losses in ‘18, and ‘19 and ‘20. But after that we're expecting to be generating some profit, and be self sustaining on a cash basis.

“And that assumed we would have a budget cap, it assumed we would have a fairer revenue distribution. There are levels of performance assumption and things we have to deliver ourselves, but the sport has to deliver that sort of equality of revenue. And if we don't get that, we will be outside of the capital business plan that we put together.”

Yeowart confirmed that the team hopes to transition to a financial year that runs from January to December: “I would prefer to be on a calendar year, but it's not the easiest thing in the world to plan and action.

“The budget cap and financial regulation started with your audited accounts, so to have an audited set of accounts from August to August is going to be no use for a budget cap point of view.”

shares
comments
The tech fallout from the Racing Point F1 verdict

Previous article

The tech fallout from the Racing Point F1 verdict

Next article

70th Anniversary GP: Bottas grabs pole as Hulkenberg stars

70th Anniversary GP: Bottas grabs pole as Hulkenberg stars
Load comments

About this article

Series Formula 1
Teams Racing Point
Author Adam Cooper
What needs to “change” for Red Bull is ending Verstappen’s errors Prime

What needs to “change” for Red Bull is ending Verstappen’s errors

OPINION: Going up against the dominant force of Mercedes and Lewis Hamilton was always going to demand the best from Red Bull and Max Verstappen. But after making a couple more errors during the Portuguese Grand Prix, the Dutch driver showed there's a small gap he still needs to close in the 2021 Formula 1 title fight.

The "subtle" Red Bull upgrades that kept it in the Portugal F1 mix Prime

The "subtle" Red Bull upgrades that kept it in the Portugal F1 mix

Red Bull's Portuguese Grand Prix fortunes were decidedly second best to Mercedes', but the result skews the potential that the team had at Portimao. With a new set of updates, the team looks good going forward into the rest of 2021's spicy F1 competition

Formula 1
May 3, 2021
Portuguese Grand Prix driver ratings Prime

Portuguese Grand Prix driver ratings

The 2021 Portuguese GP will for several drivers go down as a weekend of missed opportunities amid imperfect track conditions that caused struggles with tyre warm-up. But the performances of a select few stood out from the crowd

Formula 1
May 3, 2021
The five key tests Hamilton passed to claim Portugal victory Prime

The five key tests Hamilton passed to claim Portugal victory

Just as he did in 2020, Lewis Hamilton had to come from behind to win the 2021 Portuguese Grand Prix. Only this time there were two rivals he had to pass, among the several challenges he had to overcome, on his way to securing a 97th grand prix victory

Formula 1
May 3, 2021
The data that leaves both Red Bull, Mercedes uncertain of supremacy Prime

The data that leaves both Red Bull, Mercedes uncertain of supremacy

Lewis Hamilton topped the crucial FP2 session on Friday as F1 returned to Portugal, but his Mercedes team cannot be sure it has the edge on its Red Bull rivals. As cool temperatures and wind combine with the still-slippery surface to present drivers with quandaries over set-up and tyre warmup, there's still everything to play for come qualifying.

Formula 1
May 1, 2021
How in-form Norris is staking his claim as Britain's next F1 champion Prime

How in-form Norris is staking his claim as Britain's next F1 champion

As a highly-rated Mercedes junior, George Russell is naturally billed as Lewis Hamilton's heir apparent where Britain's next Formula 1 champion is concerned. But he may face competition for that accolade from Lando Norris, fresh from a confidence-boosting run to third at Imola whose rise is being accelerated by his McLaren team’s revival

Formula 1
Apr 29, 2021
The biggest headache F1 faces over its sprint race experiments Prime

The biggest headache F1 faces over its sprint race experiments

The news this week that F1 has green-lit 'sprint qualifying' races that will determine the grid for three grands prix in 2021 was met with a blend of excitement and scepticism. But before those in both camps can be vilified, F1 must first work out what its criteria is for success - and what will justify making them a more permanent fixture

Formula 1
Apr 28, 2021
The essential quality Tsunoda has to harness better Prime

The essential quality Tsunoda has to harness better

A rapid ascent through the junior categories meant Yuki Tsunoda's arrival in Formula 1 was always going to be much-hyped. It's not been smooth sailing for Red Bull's latest protege so far, but his confidence has never wavered - something he'll need to rely on to continue his progress into the driver he believes he can be.

Formula 1
Apr 27, 2021