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McLaren loss accelerates but business booms

NEWS STORY
17/11/2008

It's that time of year again when F1's on-track action takes a break and news instead switches to the finances of the sport as the teams file their annual accounts. We recently saw Williams record a whopping £21.4m loss for 2007 with the team trebling net debt to keep its engine running. Now it's the turn of this year's world champions McLaren.

According to a recent report in the Evening Standard newspaper, written by Pitpass' business reporter Chris Sylt, McLaren made an after-tax loss of £34.5m last year, but, unlike Williams, it has a lot to smile about

The loss was down to the fine handed to the team by the FIA for it being in possession of confidential data from Ferrari. The accounts state that the estimated total cost of the fine is £38m - £32m for the penalty itself and another £6m in associated costs (most probably crossing the palms of the lawyers with silver). This sent the team's after-tax loss up tenfold from the previous year but the success story is seen right at the very top of its financial statements.

In 2007 McLaren's revenues increased 16% to a record £127.4m as the team got a £22.5m boost from new sponsors. Fuelling this increase were its new title sponsor Vodafone as well as banking giant Santander and Chinese technology firm Aigo. And although the FIA is trying to cut costs in F1, McLaren's total overheads only increased year-on-year by a modest 5.5% to £125.7m.

Despite missing out on winning the world title in 2007 by just one point, McLaren's staff got a nice present at the end of the year. Staff numbers went up 4% to 570 in 2007 but their pay increased 10% to £34.9m - an incentive that seems to have worked given the silverware the team took home. However, it wasn't all smooth running.

To motor through the year despite the fine, McLaren Group, the team's parent, burned through nearly all its cash in the bank which decreased £11m to £600,000. It also ended the year with a net debt of £7.5 compared to net funds of £1.4m in 2006. As a result of the team's loss, shareholders' funds for the Group, were down 27.9% to £80.7m. Nevertheless, its owners can take it on the chin.

The Group is 30% owned by Mumtalakat, the investment arm of the kingdom of Bahrain, which has a portfolio valued at £5bn with businesses such as Bahrain International Circuit and Gulf Air sitting alongside McLaren. The largest stake in McLaren is a 40% shareholding in the hands of Daimler, owner of the team's engine provider Mercedes. McLaren's team principal Ron Dennis and Saudi tycoon Mansour Ojjeh hold the remaining 30% between them. The group's highest-paid director, believed to be Dennis, is on a £2.4m salary but he has more than that to look forward to.

Winning the drivers' championship makes McLaren even more desirable for sponsors and the other aspect to the group's business is the production of its £350,000 SLR supercar. Its sales were down slightly to £78m in 2007 but this was anticipated as the company prepared for the launch of a new roadster which should boost revenues this year.

The accounts also state that prize money due for 2006 and 2007 should rise by £13m on the signing of the new Concorde Agreement committing the teams to race in F1. It should bring McLaren's bottom line performance in 2008 in line with its success on track.

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