09/01/2011
NEWS STORY
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Despite having an estimated total of £1.3bn available to them last year, between April and November 2010 the 12 F1 teams paid their bills on average 28 days late.
The news comes courtesy of a report by Pitpass' business editor Chris Sylt in today's Mail on Sunday newspaper and it reveals that although the outlook of the sport accelerated during last year, the teams paid their bills four times slower at the end of the season than at the start (see box below).
The payment data has been compiled by business information firm Dun & Bradstreet which surveys thousands of companies to produce reports on the length of time it takes bills to be settled. It reports its findings on F1 teams several times each year and the results reveal how their businesses are ticking over. The longer it takes a team to settle its bills, the higher the likelihood that it has a cashflow problem.
On the surface it seemed that the sport enjoyed a banner year in 2010 but we all know that the economy was still recovering from the beating it took over the previous two years. It affected companies connected with all areas of F1, from car manufacturers to caterers, so it is no surprise that cash was not as free-flowing as in years gone by.
Despite cost cuts, running an F1 team is still an expensive hobby, requiring an average annual budget of £107m according to F1's industry monitor Formula Money. So with purse strings pulled tighter something had to give. Grass roots businesses caught the brunt of this as teams managed their high expenses during the downturn by delaying payment to their clients. F1 teams deal with many types of firms including designers, equipment suppliers and haulage firms. According to the data, few were paid on time.
Remarkably, only two teams, Red Bull Racing and Toro Rosso, settled their bills on time between April and November with the latter improving the speed of its payment time by one day on the previous four month period. Ferrari was the only other team which improved its pace when it comes to settling bills but it still paid 15 days late. This seems hard to justify given the £253m budget at its disposal. Even McLaren and Mercedes, two other teams which are awash with cash, paid their bills 17 and 11 days late respectively.
The title of biggest increase in late payment goes to Renault which settled its bills 180% slower as it suffered a tumultuous season. The team needed two loans, totalling over £18m, to stay on track and it has changed hands twice in just over 12 months with Genii Capital buying a 75% stake in it in December 2009 followed by the sale of Renault's remaining 25% to Group Lotus one year later.
Williams had the second biggest increase in late payment with creditors waiting 50% longer than they previously did. Its financial woes have been driven by the departure of sponsors and there hasn't been much let up on that front.
The team's turnover was down 13.8% to £108.3m in 2009 as it lost backing from bankrupt Icelandic conglomerate Baugur. It then suffered a further blow at the end of last year when it lost an estimated £28m in sponsorship as four brands, including the Royal Bank of Scotland, pulled out. It will get a slight boost from Pastor Maldonado this year as he replaces Nico Hulkenberg and brings an estimated £10m of sponsorship from Venezuelan businesses. However, it may take more than that to turn around its reversing payment speed.
The worst offender is Tony Fernandes' Lotus team which paid its bills 180 days late. This sends out a strong warning to companies not to get involved with the team which only joined F1 last year. Perhaps surprisingly, its payment speed was far worse than that of fellow new team Virgin Racing which faced repeated questions over its financial security last year.
Virgin Racing's bills were 8 days overdue which is far from perfect but is not a bad achievement given its youth and limited budget. This may have helped to attract Russian car manufacturer Marussia which bought an undisclosed stake in the team in November.
We are spared from finding out how long it takes HRT to settle its bills as Dun & Bradstreet has no data on it. With an estimated budget of just £30m last year it is a feat in itself that HRT is still around but whether this has come at the expense of its clients remains to be seen. Other cases are more clear cut.
Force India's bills are on average 30 days overdue despite the team being owned by Indian billionaire Vijay Mallya whose toys include a 95 metre yacht. One supplier, who did not wish to be named, says that his company has had to pay its own staff late as a result of overdue bills from the team. "If Vijay sold his boat it would keep the team going for a couple of years," he adds.
| Team |
Number of days bills paid late (Dec 2009 - Apr 2010) |
Number of days bills paid late (Apr 2010 - Nov 2010) |
Difference |
| Renault | 5 | 14 | -180% |
| Williams | 6 | 9 | -50% |
| Mercedes | 9 | 11 | -22% |
| McLaren | 14 | 17 | -21% |
| Toro Rosso | 0 | 0 | 0% |
| Ferrari | 16 | 15 | 6% |
| Red Bull Racing | 1 | 0 | 100% |
| Virgin | No Data | 8 | n/a |
| Force India | No Data | 30 | n/a |
| Lotus | No Data | 180 | n/a |
| Sauber | No Data | No Data | n/a |
| HRT | No Data | No Data | n/a |
| Average | 7 | 28 | -300% |
Source: Dun&Bradstreet F1 Paydex