27/09/2011
NEWS STORY
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Hot on the heels of last week's news from the Financial Times in Germany, where Pitpass' business editor Christian Sylt revealed that Red Bull is not selling either of its F1 teams, more details have now come to light about why.
Red Bull Racing boss Christian Horner has exclusively told Sylt that although the team's costs increased last year, due to staff bonuses being paid, it still made a healthy profit. Ironically, this is thanks to the Resource Restriction Agreement (RRA), which caps team costs and proves that it has a place in F1.
Red Bull Racing's finances last year were shaped by its on-track success with Sebastian Vettel steering the team to both F1 titles. "The biggest increases for us, on the revenue side, was a 20% increase [in prize money] from Formula One Management and sponsorship," says Horner. Pepe Jeans, electronics firm LG and forex broker FXDD joined its roster during 2010 and their input was crucial.
"Our costs have increased," says Horner adding that "we've been under obviously closer control and scrutiny due to the RRA, but we've been fully compliant with that. The reason that costs have increased is purely down to success bonuses, both with staff and predominantly driver." Many drivers are believed to get bonuses of around £1m for winning a race so a 33% increase for winning the world championship would not be unimaginable. Given that Vettel won five races last year and was on an estimated £5m salary, it is easy to see how his results alone could have transformed Red Bull Racing's costs.
Horner says that although costs increased, total expenditure did not go up as much as the team expected due to F1 spending restrictions. "Control of costs combined with the increase in external revenues meant that Red Bull Racing has become more successful at a lower cost to the group," he explains.
Red Bull Racing's accounts show that in 2009 it covered £96.9m of the team's £132m costs but Horner says it now provides less than half. "The cost of Formula One to Red Bull is below 50% [of our expenditure] and is continuing to reduce." In contrast, its returns are accelerating.
According to the sport's industry guide Formula Money, Red Bull's Advertising Value Equivalent - the price it would have to pay to buy advertising equivalent to its F1 on-screen exposure time - came to an estimated £136.9m in 2009 and £219.9m in 2010 when it got almost a quarter of the total received by all the teams.
The team is wholly-owned by the Austrian drinks company Red Bull through its UK holding company Red Bull Technology. Horner says that the company made a £2.8m pre-tax profit last year with 75% of this down to F1 and other projects contributing the remainder.
Until the end of 2009 Red Bull Technology was responsible for designing Red Bull Racing's cars and those of its Italian sister team Toro Rosso. However, a change of regulations in the Concorde Agreement, the contract which commits the teams to race in F1, forced Toro Rosso to design its own car in-house. This led to Red Bull Technology diversifying. "It took on quite a few other activities that included work with the Red Bull Air Race airplane series and other developments of products and marketing activities within the beverage business."
Horner adds, "that's expanded in 2011. Red Bull Technology has taken on point of sale production for the beverage group and we've got a contract to produce gear boxes for Team Lotus. It's an evolving technical business." Given Red Bull Racing's track record, you can't argue with that.