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Formula 1 Q2 revenues down nearly $600m due to Covid-19

Chase Carey, CEO and Executive Chairman of Formula One Group, at press conference held before 2020 Australian GP was cancelled (by Clive Mason/Getty Images)

The Covid-19 pandemic caused Formula 1’s revenues to drop by just under $600m (€510m) and 96 per cent year-on-year, according to the latest set of second-quarter results published by owners Liberty Media.

Revenues declined from $620m in Q2 2019 to just $24m in Q2 2020 during a period when the motorsport was unable to schedule any races, leading to a $122m operating loss overall. F1 reported an operating profit of $26m in the second quarter of 2019, a period when it was able to schedule seven races.

F1 divides income into ‘primary revenues’ comprised of race promotion fees, broadcast fees, advertising and sponsorship fees and ‘other revenues’ consisting of hospitality and other event-based and television production activities.

The series generated $12m from primary revenue sources in Q2 2020, versus $531m in Q2 2019, and a further $12m from other sources versus $89m in 2019.

Liberty Media said in a statement: “Since there were no events held during the second quarter of 2020, revenue recognition was limited, with recognised primary F1 revenue in the period consisting only of the elements of sponsorship contracts associated with non-race related rights.”

But the motorsport also managed to significantly reduce its overheads during the same accounting period. The series made no payments to teams during this time, saving $335m compared with the same three months last year, because team payments are recognized on a pro-rata basis as races take place in the calendar.

Other revenue-related costs also declined by 85 per cent (from $106m to $16m) owing to the cancellation of races and deferral of non-critical expenses.

Liberty Media said: “Selling, general and administrative expense decreased due to lower personnel costs and lower discretionary marketing expenditures, partially offset by the effects of foreign exchange-related losses. F1 implemented certain cost cutting measures in the second quarter, including the elimination or deferral of non-essential expenditures, salary reductions and lower bonus accruals.”

The motorsport also availed itself of the UK government’s furlough scheme for 50 per cent of its employees between April 3 and June 30, but expects personnel costs to return to normal in the third quarter now that the F1 season is underway and the furlough scheme is coming to an end.

In late June Liberty Media announced an amendment to the term loan and revolving credit facility of certain subsidiaries of Delta Topco, the subsidiary that holds all of its interests in the F1 motor racing championship.

F1 chairman and chief executive Chase Carey said at the time the new flexibility in the debt covenants would enable the motorsport to weather the pandemic.

In April, Liberty Media also announced that it had reattributed its stake in Live Nation Entertainment from the sport to its SiriusXM tracking stock in a move that saw $1.5bn in net asset value go in each direction. The move ensured F1 received a net cash payment of $1.4bn as it sought to deal with the challenges created for the championship by Covid-19.

F1 posted an 84-per-cent year-on-year drop in net profit in the first quarter, at $39m, down from $246m a year ago, and an operating loss of $137m, compared to $47m in the same period last year.

The F1 season recently resumed with closed-door events in Austria, Hungary and the UK as part of a European swing that will also include races in Spain, Italy, Belgium and Russia.

F1 and its partners are currently evaluating plans for a reduced number of fans to safely return to certain races in some capacity in 2020.

Quoted in the financial results Carey (pictured) said: “We were excited to return to the track in July and have now completed five races of what we expect will be a 15-to-18 race season.

“During the break we continued to move the business forward with a reduced cost cap for the 2021 season and announced new broadcast and sponsorship deals.

“We reengaged with added purpose and determination, announcing our #WeRaceAsOne platform, underpinning our sustainability, diversity & inclusion and community strategies. #WeRaceAsOne was launched as an initiative to further our sustainability efforts, to stand united against racism, fight against Covid-19 and to further address inequality and diversity in F1. We are thankful to the FIA, teams, promoters, our employees and other key partners that made this return to racing possible.”