21/10/2013
NEWS STORY
Earlier this month it came to light that Marussia had taken the title of making the biggest loss of any team in Formula One history. The previous holder of this dubious honour was Lotus as Pitpass' business editor Christian Sylt revealed in May, but Marussia left it for dust with a net loss for 2012 of £59m. The news appeared in a UK paper on the very same day that its financial statements became available which seems unusual as it could raise the question of whether the team itself gave a tip off with the bad news. If that is what happened it would be strange even by Formula One standards.
The general rule of thumb is to keep quiet about bad news. Doing the opposite simply increases the coverage of it because the outlet which is tipped off would perhaps not have otherwise written about it and others will do so anyway. There are only a few occasions when this has happened in F1's history and they aren't highlights to remember.
Back in 2011 Silverstone's owner the BRDC issued a press release stating that it had moved from a £1.3m profit in 2009 to a £1.9m loss in 2010. It followed an equally strange incident when Williams' former chairman Adam Parr tipped off a media outlet that the team's upcoming accounts would show a 13.8% fall in revenue with profit more than halving.
As Pitpass wrote at the time, it is extremely useful to journalists like Sylt when the boss of a company gives a public tip-off indicating that its annual accounts will soon be filed. It allows multiple newspaper articles to be written - one about the tip-off and another about the meat of the accounts when they are filed. In turn this gives time to think over the details in the documents which brings us back to Marussia
In April Sylt revealed that Lloyds Development Capital (LDC), the private equity division of taxpayer-owned Lloyds bank, had sold its shares in the team to Marussia, the Russian sports car manufacturer which the outfit is named after. LDC invested an estimated £10m in Marussia in 2009 and held a 25.3% stake. Despite the team never scoring a point since joining F1 in 2009 LDC confirmed that the sale enabled it "to recoup the full value of its investment in the business."
Accounts for the team's parent company Manor HoldCo show that in the year to 31 December 2012 borrowings increased by £33m. However, that's not the end of the story. An article by Sylt in today's Daily Telegraph reveals that although LDC only provided a small portion of the debt incurred last year, the bank confirmed that it has a residual loan with the team which is believed to be around £10m.
The debt was needed to keep the team ticking over in 2012 as it burned up the record loss which widened by 27.4% on the previous year. It was driven by an 8.7% increase in costs to £76.1m whilst revenue only rose by 2.9% to £29.4m.
Staff numbers increased by 58 with the majority of the increase in production and engineering. Nevertheless, it still left the team with 46 people in management and administration out of a total 168.
It is no secret that there is a vast gulf in budgets between the top and bottom of the grid. In April Sylt revealed that Ferrari's F1 contract entitles it to a minimum amount of guaranteed annual prize money which comes to more than double Marussia's revenue.
F1's smaller teams often say that they face difficult times due to F1's soaring costs. Indeed, in May Marussia's sporting director Graeme Lowdon said that "if there are sharp fluctuations in revenues and increasing costs then it is a recipe for serious trouble. It should be attractive for all the players in the industry, not a few." That may well be true but it is perhaps not the only factor at work. GP3 does not have the same fluctuations in revenues and increasing costs which are hallmarks of F1 but Marussia's accounts show that its team in that series made a £178,000 net loss in 2012 on revenue of £1.2m.
Marussia F1's chief executive Andy Webb says that the F1 marketplace "continues to exhibit some volatility in terms of sponsorship income which has come under pressure from the condition of the global economy."
In the 2011 accounts Webb revealed that he was in "active discussions with potential new investors in the business" and in the latest filing he says there are still "on-going discussions with a number of interested parties." The 2011 documents also stated that Marussia has an objective of a podium finish in the inaugural Russian Grand Prix next year. Perhaps unsurprisingly, this bold aim is noticeably absent from the latest documents.