F1 'made loss' in first half of year, but steps taken to reduce debt payments
Formula 1 made a net loss of $27 million in the second quarter of this year even though revenues were up on the same period in 2016, it has been reported.
Last week, Liberty Media, the new owner of the sport, announced that Formula 1 generated turnover of $616 million in the three months from April to June.
This represented a 2.7-per-cent increase on the second quarter a year earlier, when Bernie Ecclestone, the long-time Formula 1 promoter was still at the helm.
However, operating income halved from $90 million to $45 million as expenses increased in the latest three-month period.
Moreover, these figures do not include interest payments on debt, and Formula One Group actually lost $27 million from April to June, taking the total loss for the first six months of the year to $123 million, Formula 1 financial expert Christian Sylt wrote in an article for Forbes.
Liberty took control of Formula 1's parent company Delta Topco from former owner CVC Capital Partners in January in a deal that put the enterprise value of the sport at $8 billion, but it is reported that the bulk of the $4.6-billion acquisition was funded with debt, a share offering and a loan that can be exchanged for shares, with Liberty putting up only $301 million of its own money.
However, Formula 1 chief executive and chairman Chase Carey (pictured) claimed last week that it had “successfully eliminated an expensive $1-billion tier of debt, repriced our remaining debt, and have also received upgrades from the ratings agencies. The combined effects will be to reduce annual interest expense by up to $90 million going forward.”
In addition, a majority of the Formula 1 races (12) are in the second half of this year, meaning the sport is more likely to make a profit.
Significant expenses in the first six months of Liberty's stewardship have included a recruitment drive, investment in digital technology and advance spending on the F1 Live event on the streets of London ahead of last month's British Grand Prix.
Carey said: “The corporate head count has been sort of 70-75, and it has probably about doubled. We're still building it out. We've hired most of the senior executives, but we haven't built the team out fully.
"We don't really have an appropriate digital platform today, so there are investments that we've made to support a digital platform for us going forward. In the next few months for the first time we're refining our plans around that."