Fears for Sil­ver­stone as KPMG au­di­tors wave red flag over F1 fees

The Sunday Telegraph - Money & Business - - Business - By Chris­tian Sylt

SIL­VER­STONE, the mo­tor rac­ing cir­cuit, is seek­ing a life­line of up to £13m amid “ma­te­rial un­cer­tainty” over its fu­ture, fu­elled by losses from host­ing the Bri­tish Grand Prix in For­mula One.

The track sits on a for­mer air­field in Northamp­ton­shire and is owned by the Bri­tish Rac­ing Driv­ers’ Club, a group of more than 800 mo­tor­sport lu­mi­nar­ies in­clud­ing Sir Jackie Ste­wart, Nigel Mansell and the reign­ing F1 cham­pion, Lewis Hamil­ton. The club’s ac­counts for the year-end­ing Dec 31 2017 state: “Dis­cus­sions with po­ten­tial lenders have com­menced … and sen­si­tised fore­casts in­di­cate a fa­cil­ity of be­tween £10m to 13m will be re­quired.”

Since 2012, the club has run up com­bined net losses of £52.2m driven by its flag­ship race. Sil­ver­stone is the only F1 track that lacks gov­ern­ment fund­ing so it has to cover the grand prix run­ning costs and £17m host­ing fee largely from ticket sales.

The fee is paid to F1’s owner, Lib­erty Me­dia, and rises by about 5pc a year, mean­ing that ticket prices have to rise to com­pen­sate. In turn, that makes it harder to at­tract spec­ta­tors – crowds fell this year by 5.1pc to 130,000.

In an at­tempt to staunch its losses, the club has bro­ken its F1 con­tract seven years early and the 2019 race is on track to be the last. The club’s pre- car­i­ous fi­nan­cial po­si­tion led to a de­fer­ral of the F1 fee five years ago. The pay­ment is due in 2019.

A let­ter sent ear­lier this month by John Grant, the BRDC chair­man, to mem­bers said that the club will have to pay “F1 fol­low­ing the end­ing of the de­ferred pay­ment ar­range­ment agreed five years ago for the an­nual pro­moter’s fee, which ends af­ter the 2019 BGP (re­gard­less of whether the BGP con­tin­ues there­after).” Mr Grant said that the club “planned to meet this pay­ment from avail­able cash, sup­ple­mented if nec­es­sary by bank bor­row­ings”.

The cir­cuit it­self could be used as se­cu­rity as the ac­counts state: “The di­rec­tors are con­fi­dent that, based on the ex­is­tence of valu­able se­cu­rity in the form of the Sil­ver­stone cir­cuit, agree­ment of an ap­pro­pri­ate fa­cil­ity will be reached to al­low the group to con­tinue to meet its li­a­bil­i­ties.”

Although the club has be­gun dis­cus­sions with lenders, no fa­cil­ity is yet in place, prompt­ing au­di­tors KPMG to raise the alarm. KPMG said: “The group’s cash-flow fore­casts in­di­cate that it will re­quire ad­di­tional debt fa­cil­i­ties in Septem­ber 2019 in or­der to meet its obli­ga­tions as they fall due, the amount of which, and the group’s abil­ity to ser­vice and ul­ti­mately re­pay any such fa­cil­ity, is de­pen­dent on the sub­stan­tial achieve­ment of its fore­casts.

“These cir­cum­stances con­sti­tute a ma­te­rial un­cer­tainty that may cast sig­nif­i­cant doubt on the group’s abil­ity to con­tinue as a go­ing con­cern.”

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