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Bernie payments fuelled record revenue for Renault

NEWS STORY
14/03/2011

Never let it be said that Formula One boss Bernie Ecclestone isn't generous to the teams. When Williams needed it he advanced the team the increased amount of prize money it was due to receive and now, courtesy of a report in the Independent by Pitpass' business editor Chris Sylt, we discover how much his generosity has helped Renault.

To the man on the street 2009 didn't look like a good year for Renault. First the team was accused of fixing the result of the 2008 Singapore Grand Prix by telling Nelson Piquet Junior to deliberately crash. Then its team principal Flavio Briatore resigned over the allegation. He was followed by several sponsors including Spanish insurer Mutua Madrilena and ING which alone was believed to be paying the team 40m annually. To cap it all off, the team lost two-time world champion Fernando Alonso at the end of the year. It finished the season in eighth place - its lowest ranking since Renault bought the team from clothing company Benetton in 2000.

This catalogue of catastrophe hardly sounds like the ingredients for a record year of financial results but that is precisely what the team enjoyed in 2009.

Despite the loss of sponsorship Renault's revenues accelerated 9% to a record 161m in the year ending 31 December 2009. Its bottom line was just as rosy as the team finished the year with a pre-tax profit of 11.1m up from a 12.6m loss the previous year. The introduction of the Resource Restriction Agreement led to 49 jobs being cut, with the majority coming from the engineering department, and the team's total costs reversed by 10m. However, this wasn't the real reason why the team's fortunes soared in 2009.

The catalyst was a big boost in the amount of prize money received by all the teams. In 2009 they signed a new contract, the Concorde Agreement, which committed them to stay in F1 until the end of 2012. It put in writing that they share between them 50% of the sport's profits as prize money and this doubled their take from F1. In addition, the teams got a signing bonus comprising the difference between the sum they previously received and their new profit share backdated from 2004 to 2007.

The accounts don't hide from this and state bluntly that revenues increased "principally from an increase in TV Prize Income, which included backdated earnings recognised upon the signing of the new 2009 Concorde Agreement." It was a huge windfall for Renault and the manufacturer took the opportunity to quit whilst it was ahead.

To distance itself from F1 Renault sold a 75% stake in its team to Luxembourg-based private equity firm Genii in February last year. Genii bought the remaining shares in December but the team still uses Renault's engines. So, just as was the case with Brawn GP in 2009, Renault may have looked like it was in terrible shape financially but in fact it had a blinding year and it is thanks to a deal cut with Ecclestone.

The profits were ploughed back into the team and it made 6.5m of capital investments during the year with the bulk being new machinery. It didn't give the team the boost it was looking for as it finished a dismal eighth in the 2009 standings, down four places from the previous year.

In 2010 the team got new sponsors, including HP and Lada, to plug some of the gap left by ING and it rose to fifth in the standings. It is still a far cry from its heydays when it won two championships under Renault's sole ownership. There is a smoother road ahead of it this year as the Lotus car company has become its title sponsor at an estimated annual cost of 25m.

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