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Force India finally sheds some light on its finances

NEWS STORY
21/01/2009

Vijay Mallya has been an F1 team owner for well over a year now and although he is a billionaire he hasn't brought with him much insight into the finances of his team Force India. Chris Sylt lifts the lid a little bit further.

Around the time that the Spyker car company sold the team to Mallya it was due to file its annual accounts for 2006 but this was not to be. In fact, Force India has only filed these accounts in the last few weeks and they give some explanation as to why there was a delay.

"We acknowledge that the accounts for these companies have not been filed," Mallya said last July explaining that "this situation... has come about as a result of a requirement to resolve some minor outstanding issues that have come to light since the acquisition of Force India in October 2007...such accounting issues, sometimes, do crop up especially when there is a change of ownership." One issue, which is still outstanding, sheds some light on the relationship between the team and its former team principal Colin Kolles who left late last year.

The accounts state that in 2006 Force India paid 504,000 to a German company called Kodewa for Kolles' services to the team. However, it adds that the team received invoices for a further $578,310 from Kodewa for commission which became quite a hot potato. A note in the accounts reads that "payment of these invoices is disputed because the board have been informed by the previous owner of the Company, Spyker Cars, and a previous director of the company that the Company had no agreement to pay Kodewa the amounts claimed in the invoices at the time they are alleged to have been earned." It is a problem that the team could do without.

Spyker may have been injecting some capital into the team as its revenues rose 47% to 37.3m in 2006 dropping its after-tax loss from 19.8m to 9m. However, Spyker also seems to have been lending the team money as the amounts it owed to other companies in the group accelerated from 26.2m to 39.2m in 2006. This led to the net debt rising from 31.2m to 48.7m and a shareholders' deficit of 39.2m. The team is a going concern because its owners have agreed to fund it for the next 12 months from now. However, this is no guarantee that it will remain on the grid since Honda made the same claim about its F1 outfit just weeks before it pulled the plug.

Force India's saving grace maybe its modest overheads. In 2006 it spent just 10.4m on research and development and had only 10.6m of fixed assets. Staff numbers increased from 192 to 238 but, to put it in perspective, its engine supplier McLaren employs over double this number.

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