The owners of Formula One have completed a refinancing that has paved the way for a large dividend payout to the company’s shareholders.
Last year, F1’s bank borrowings accelerated by US$2 billion ($3.2 billion), half of which went to investors. CVC, the private equity firm, received US$350 million in line with its 35 per cent stake.
The payout followed a strong year for the sport, with pre-tax profits up more than a third from US$284.6 million to $394.1 million, and revenue up 3.2 per cent to a record US$1.8 billion.
The improved financial performance came after F1 boss Bernie Ecclestone established new races in Russia and Austria. The sport returned to Austria after an 11-year hiatus, while Russia joined the season with a grand prix in the Olympic resort of Sochi.
Italian premier Matteo Renzi, left, talks with Formula One Group's Chief Executive Bernie Ecclestone as they meet in the paddock prior to the Italian Formula One Grand Prix at the Monza racetrack, in Monza,last Sunday. Picture/AP
The races replaced grands prix in India and South Korea and boosted F1’s four core revenue streams — race hosting fees, broadcasting fees, corporate hospitality and advertising and sponsorship.
Ecclestone has taken the sport to emerging markets where it is promoted to hundreds of millions of television viewers in an attempt to drive tourism.
As the F1 calendar is limited to just over 20 races, it puts a premium on the race slots and has fuelled competition in the amount countries are prepared to pay.
Together Austria and Russia pay an estimated US$62 million in annual hosting fees, outstripping the US$46 million paid by India and South Korea. The jump in profits and sales is likely to improve F1’s appeal to suitors, including Qatar’s sovereign wealth fund and RSE Ventures, owner of the Miami Dolphins NFL team. The duo is understood to have made an approach to buy a controlling stake this year.
Ecclestone’s strategy will see F1 return to Mexico in November and the addition of a grand prix in oil-rich Azerbaijan next year to give a record 21 races.
Fees from race hosting and broadcasting made up US$1.2 billion of F1’s total revenue with a further US$161 million from television production and travel and freight services to the teams.
Revenue from the sale of tickets to F1’s corporate hospitality outfit, the Paddock Club, grew 4.9 per cent to US$110.9 million last year. It attracts some of the world’s wealthiest people.
Recent guests have included actor Michael Douglas, Star Wars director George Lucas and Mexican billionaire Carlos Slim.
Growth last year was driven by corporate demand at the new races. Advertising and sponsorship received a similar boost. The teams are among the biggest beneficiaries, as their prize money comprises 63 per cent of the sport’s earnings before interest, tax, depreciation and amortisation (EBITDA).
F1’s costs increased by 5.2 per cent to US$1.2 billion last year, while EBITDA and prize money rose 8.2 per cent to US$863.1 million. Operating profits fell 2.4 per cent to US$519.8 million.
CVC has made US$4.4 billion from dividends and selling down its stake in F1 since it took over the sport in a leveraged buy-out in 2005. Its remaining stake is understood to be worth US$7 billion to US$8 billion and has a premium attached to it as it controls the voting rights.