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Exclusive: BRDC depends on bank funding to continue as a going concern

NEWS STORY
10/07/2011

Less than three weeks ago Pitpass reported that the British Racing Drivers' Club (BRDC), owner of the Silverstone circuit which hosts today's British Grand Prix, had taken the bizarre decision to announce that its upcoming 2010 accounts would show that it had made a loss. Pitpass' business editor Christian Sylt pointed out that this seemed an absurd move since it would yield media coverage of the loss as well as further coverage once the accounts are filed.

Sylt originally suggested that the news about the loss appeared to have been given to one specific newspaper but Silverstone's public relations firm responded claiming that in fact it was disseminated in a press release. Regardless of the way it was distributed, it seems crazy to announce results (whether bad or good) from accounts before they are filed since it simply yields more coverage of other details when they are eventually released. Which brings us neatly to today's news.

Now that the accounts have been released Sylt has reported on them in today's Express and they contain even more remarkable news than the loss. In a nutshell, the accounts reveal that the BRDC requires bank funding to remain a going concern.

The BRDC is owned by 850 racing personalities including Jenson Button and Nigel Mansell, and it has been driven into its current predicament following significant investment in expanding Silverstone.

In December 2009 Silverstone signed a last-minute 17-year deal with F1's boss Bernie Ecclestone to prevent the British GP from being cancelled after Leicestershire's Donington circuit failed to honour its contract to host the race. Since then the BRDC has burnt through its cash and secured debt from Lloyds Banking Group and Northamptonshire County Council to fund construction of a new pit and paddock complex.

The BRDC's accounts for the year ending 31 December 2010 show that its creditors more than doubled to 35.6m and its cash in the bank fell 16.4m to 3.5m. These factors led to it having net current liabilities of 11.9m down from net current assets of 7.8m in 2009.

As a result of this, the accounts state that "the ability of the group to operate as a going concern is dependent upon the availability and timing of bank funding. On the basis of our current forecasts no breaks of covenants are anticipated however these forecasts are based on certain assumptions which we continue to monitor closely."

Silverstone has engaged the corporate finance arm of PricewaterhouseCoopers to secure new investors which would ensure that its expansion plans stay on track. They include hotels, driver training facilities and a visitor attraction.

As indicated by the original article, the BRDC slipped from a 1.5m after-tax profit to a 1m loss last year. Silverstone Circuits, the company which directly runs the track, fell even further, from a 4.6m net profit to a 600,000 net loss in 2010. Its revenue was up 24.6% to 45.5m and the accounts predict it will increase to circa 55m this year. They add that Silverstone Circuits' highest paid director received 129,000 - an increase of 41.8% on the previous year.

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