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F1 Teams Take Hit as Formula 1 Reports Financial Losses in Difficult 2020

The 2020 calendar year was a tough one for Formula 1—the sport and the company that bears the same name—and teams felt the affects through a reduction in the F1 Constructors’ Championship prize fund.

But the year dominated by coronavirus travel restrictions and changes in schedules could have been worse.

BY JOE SAWARD, Auto Week

The latest filings to the Securities and Exchange Commission (SEC) give an indication of just how tough that has been from a financial point of view. The company took an operating loss in 2020 of $386 million, primarily as a result of the drop in revenues from race promotion fees and advertising and sponsorship. Broadcasting fees remained relatively stable.

The Breakdown

The first three quarters of 2020 produced revenues of $661 million, down from $1.5 billion in 2019, a drop of $839 million. It was hoped that the final quarter would improve matters, but in reality there was not much likelihood of that and there was no chance at all of reaching the full-year 2019 revenue figure of $2.02 billion.

With just seven of the 17 races taking place in Q4, compared to five of 21 in 2019, the company netted revenues in Q4 of $485 million, compared to $523 million in 2019. But, with only $661 million in the first three-quarters and the $485 in Q4 the overall full-year total was still only $1.145 billion, a big drop compared to $2.02 billion in 2019.

What It Means to the Teams

This drop matters because the annual revenues of the 10 Formula 1 teams are based on percentages calculated from the annual revenue figure, which means that the prize fund was effectively down by 43 percent, compared to 2019. That is better than the feared 50 percent drop but it has still had a major financial impact on all the teams.

One must also factor in the likely drop in sponsorship because of the reduction from 22 to 17 races and the fact that there was very little opportunity to activate the sponsorships. It was faced with these worries that the teams voted to freeze development of the 2020 cars and basically use the same cars again in 2021 with a few minor tweaks.

This is why the budget cap was reduced to $145 million and why the engine freeze was first introduced for 2022. This all helped to reduce the outgoings of each team but with such a big drop in their revenues, some of them had to take on more debt and others had to sell equity in order to balance their books as much as possible.

At the least the waiting is now over and they know the numbers that they are dealing with. This means that they now have solid figures on which to calculate how to spend their 2021 budgets and whether they want to leave the 2021 cars as they are or concentrate their efforts on 2022. The majority are likely to go down the latter path.

The SEC figures showed one odd anomaly with the team payments for the year being listed at $711 million, compared to $1.01 billion in 2019. That is a reduction of only 30 percent.

However, it is safe to speculate that some of the team payments made were in the form of loans early in the year, when everything was closed down and teams were in danger of getting into trouble because of their cash-flow, and these payments would have had to be paid back later in the year.

The SEC filings include the fact that “team payments in 2020 included one-time fees paid to teams upon signing the 2021 Concorde Agreement.”

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