Briatore's 22m moneyspinner

04/01/2010
NEWS STORY

Tomorrow is D-day for Flavio Briatore for that is when he will find out whether his appeal of the ban placed on him by the FIA has been successful. If his appeal fails then the flamboyant Italian may forever be barred from working in F1.

Some sources put Briatore's wealth at 110m but, nevertheless, a recent report in the London Evening Standard by Pitpass' business editor Chris Sylt, shows that the ban could still have a considerable affect on his fortunes. Just one of his F1 ventures netted Briatore an eye-watering 22m over the past few years and paid him 6.5m in the year before being banned. No wonder he has taken on the FIA all guns a blazing.

The cash haul is revealed in the accounts to 31 December 2008 of Briatore's Kent-based company Stacourt, and its money came from the Spanish broadcast rights to F1. In 2008 Stacourt paid a 670,000 dividend and a 5.8m consultancy fee to Formula FB Business, Briatore's Virgin Islands management company, an increase of 600,000 on his take the previous year. Stacourt is ultimately controlled by Briatore's FB Trust and 2008 was a bumper year for it.

Interest in F1 in Spain accelerated in 2008 as the country hosted two races for the first time in over a decade. This boosted Stacourt's revenues by 20% to 14.5m and there was a similar increase in its costs. This cut the company's after-tax profits by almost half to 387,000 but it didn't hit Briatore's pocket. The fee to Formula FB Business makes up the bulk of the company's costs along with a payment to Formula One Management (FOM), which sold Stacourt the Spanish broadcast rights.

Most TV rights deals are arranged by FOM but its chief executive Bernie Ecclestone handed the Spanish rights directly to Briatore and he got them for a song.

Briatore didn't pick low-hanging fruit with his acquisition of the rights since the sport had a terrible track record on television in Spain. In 1996, Telecinco broadcast races in the middle of the night which reportedly got less than 200,000 viewers. TVE acquired the rights the following year but still only managed to get audiences of around 600,000. Briatore bet on the ability of a certain young Spanish driver he managed called Fernando Alonso and he put his money where his mouth is.

In early 2001 Briatore hired the 19 year-old on a five-year contract with Renault and also brought him under his FB Management company. At the time the outlook for the sport on Spanish TV was bleaker than ever.

F1 was removed from national free-to-air broadcasting in 2002 after none of the national channels bid for the rights. Briatore seized an opportunity to snap up an undervalued asset that had massive potential.

Spanish station Antena 3 reportedly screened F1 for free in 2003 whilst another national station TVE is thought to have only shown the sport after Renault provided 1.5m in exchange for advertising slots. It more than paid off.

Alonso's first victory at the Hungarian Grand Prix in 2003 immediately made him a superstar for being the then youngest-ever race winner. Over the year TVE got an audience share of 19.7% with 1.7m viewers. Stacourt's balance sheet began to balloon.

In the year-ending 31 December 2003 Stacourt had a turnover of 3m. Its total costs came to 2.4m which included a fee to FOM as well as 700,000 of consultancy fees which the accounts state were paid to Formula FB Business. Stacourt made a healthy retained profit of 375,000 but this was small fry compared to what was to come.

'Alonsomania' seized Spain following the driver's first victory and Telecinco, one of Spain's leading private TV companies, signed a contract to broadcast F1 for 2004 and 2005 at an estimated price of 3.5m per year. It soon filtered to Stacourt's bottom line.

During the year-ending 31 December 2004, Stacourt was able to pay an interim dividend of 300,100 on top of consultancy fees to Formula FB Business which more than doubled to 1.5m. Stacourt's turnover increased over 50% to 4.6m and its total costs nearly increased by the same amount leaving a retained profit of 439,000.

The following year turnover rose yet again to 5.9m and, after deducting a 2.1m payment to Formula FB Business and a 526,000 interim dividend, its after-tax profit came to 1.3m. In 2006 Briatore picked up 4.8m and another 5.8m in 2007 as Stacourt's after-tax profits surged 42% year-on-year to 675,000.

Stacourt has so far paid more than 22m to Briatore in the form of interim dividends and consultancy fees. It still has a cash pile of 472,000 in the bank and, after deducting liabilities, shareholders' funds came to 400,000 at the end of 2008.

Stacourt's turnover has increased nearly five-fold since it was established but the Spanish TV audience has soared by an even greater degree.

In 2004 Telecinco's average audience share for F1 was 32.9% with 2.7m viewers - an increase of over 60% on the performance achieved by TVE in 2003. The catalyst for sending the audiences skyrocketing was Alonso's improved performance in 2005 culminating in him being crowned the youngest-ever F1 world champion.

The signs that 2005 would be successful came early in the year as the Spanish Grand Prix was the most watched race in the history of Spanish television with a 49.7% share and 6,059,000 viewers. Telecinco got a greater audience share than any other channel at the time and the most watched minute of the race had a massive 7,509,000 viewers.

Overall, Telecinco's F1 audience share increased by 29.1 points and 2,179,000 viewers in 2005. The results were strong enough for Telecinco to commit to broadcasting F1 for another three years from 2006 to 2008 in a deal estimated at 17m per year. It was a cost well worth bearing as it was believed that Telecinco would make around 70m in advertising revenue across its five years of F1 broadcasts.

Telecinco lost the F1 deal from 2009 to the La Sexta channel owned by Mediapro. Estimates have suggested that the five-year contract could be worth as much as 65m annually making it F1's biggest TV rights deal.

Even more surprisingly, when this was announced it was stated that the station had signed the contract with FOM, not Stacourt. So it seems that when CVC acquired its majority stake in FOM in 2006, the private equity firm may have insisted that the Spanish rights return to it as soon as the existing contract comes up for expiry. Briatore clearly did too good a job and although he has lost this moneyspinner regardless of his ban, if it is any indication of the riches which he was reaping from F1 then he is likely to be praying for a positive outcome tomorrow.

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Published: 04/01/2010
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