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Prodrive profit accelerates as do its F1 chances

NEWS STORY
27/04/2009

On Wednesday, the FIA's famed 2010 F1 budget cap will be put before the World Council and rumours about potential teams which could take advantage of it have been flooding the media for the past few weeks. The FIA has suggested the system and so it must be most thankful that these teams have come out of the woodwork in support. Perhaps the most high-profile of them is Prodrive, the engineering business run by former BAR boss David Richards.

Richards came to the FIA's aid several years ago when the car manufacturers involved with F1 were threatening to set up a rival series and the federation set out to show that they could be replaced. Prodrive even went as far as to register its interest in entering F1 in 2008 but this was not to be as the row over customer cars put paid to the team buying a chassis.

According to an article in the Financial Times written by Pitpass' business editor, Chris Sylt, the latest accounts for Richards' moribund F1 team show that Prodrive took a 160,000 hit on its foray into the sport. However, the company won't be losing much sleep over this.

Prodrive overall made a 1.9m after-tax profit last year. Race wins and the design of cutting-edge cars drove a 16% increase in revenues to 110m and brought an eight-fold boost to its bottom line. It gives a good war chest for Prodrive to invest in yet another attempt at entering F1. Time will tell whether this is a case of throwing good money after bad but one thing which is not in doubt is that Prodrive made very good money last year.

Prodrive is majority owned by Richards with the Kuwaiti Investment Dar sovereign wealth fund, which holds a 40% stake. They shared a 1m dividend from Prodrive last year and the highest-paid director, believed to be Richards, doubled his salary to 418,000. Investment Dar spent an estimated 20m buying its stake in Prodrive last December and its rosy results in 2008 fuelled a 68.6% growth in shareholders' funds to 10.1m with cash in the bank rising by 3.6m.

Prodrive has won six world rally championships by running a team for Subaru and in 2008 it won the GTI class in the Le Mans 24 hour race. It also makes limited edition cars for manufacturers like Ford and Alfa Romeo which featured its specially-tuned Prodrive model in a series of high-profile television advertisements last year. Richards says that concentrating on "advanced engineering for future vehicles has enabled the business to retain stability through the global economic downturn at the end of 2008." Nevertheless, Prodrive may not have such an easy ride this year.

It last won the rally drivers' title in 2003 and another victory isn't on the horizon as Subaru withdrew from the championship in December last year due to the economic downturn. The accounts state that a settlement was negotiated with the manufacturer but the amount is not stated.

Prodrive's financial director Clive Scrivener says "we are in discussions with a number of vehicle manufacturers who are considering different forms of motorsport activity, including rallying and the World Rally Championship." He adds that "we have seen a tightening in many of our markets, and a slow down in the spending of businesses in the automotive sector." However, the engineering side of Prodrive's business should benefit from legislation to make cars greener and cheaper.

"We are working on a number of advanced engineering projects where we are applying our extensive intellectual property in hybrid vehicles to develop the new generation of emission reducing technologies. These include electric and flywheel hybrid systems for road vehicles," says Scrivener.

Richards adds that "the challenge of developing future vehicle technologies to meet coming legislative and market demands continues to create opportunity and growth potential for the business." During 2008 he added 20 staff to give Prodrive a total of 866 who are paid an average of 40,000. It is a rare ray of light in the currently bleak economy.

Whether F1 will make Prodrive's results brighter or take the shine off them remains to be seen.

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