Red Bull has revealed how much it costs to keep its Toro Rosso F1 team ticking over (Dan ... [+]
Red Bull has revealed precisely how much it costs to keep the wheels of one of its Formula One teams turning, right down to the amount it spends on buying the material to build the cars and the stickers that appear on them.
Unlike teams in some other sports, F1 outfits disclose a great deal of financial information and there is good reason for this. Seven of the ten teams are based in Britain and are private limited companies which, ironically, have to file publicly-available annual financial statements. This requirement applies to any private limited company in Britain with more than $11.4 million (£10.2 million) of annual revenue and over 50 employees so it covers all the F1 teams based there.
Their financial statements itemise certain costs like salaries and investment in fixed assets but the bulk of the spending is split into production costs and administrative expenses. In contrast, private limited companies in Italy have to disclose far more information including a detailed analysis of their revenue and costs. It lifts the lid on the finances of one of the F1 teams in particular.
The three outfits based outside Britain are Switzerland’s Alfa Romeo, Italy’s famous Ferrari squad and Red Bull’s junior team Toro Rosso. Swiss companies aren’t required to file public financial statements so that puts the brakes on analysis of Alfa Romeo’s finances. Ferrari’s F1 team is just a division of the auto maker so it doesn’t need to disclose detailed financial results. However, Toro Rosso is the exception.
The team’s sister outfit is Red Bull Racing which is also owned by the Austrian energy drinks giant. Both teams are private limited companies but Red Bull Racing is based in Britain whereas Toro Rosso is located in Italy. This means it has to file detailed financial statements which are around 50% longer than the ones for its counterpart in Britain. However, the documents are in Italian so have largely remained under the radar. Until now.
Toro Rosso has an aerodynamics department in Britain which led to it establishing a branch office in the country. In turn, it has to translate its financial statements into English and although it has been doing this since 2011, its filings have accelerated over the past 18 months. They included three years of backdated financial statements which reveal precisely what it takes to keep the team ticking over.
The team’s single biggest source of revenue is Red Bull itself which plasters its logos on the sides of Toro Rosso’s cars as well as on their front and rear wings. In the year to 31 December 2018 Red Bull poured $82.9 million (€74.4 million) into the team in return for this exposure. Then comes $30.3 million (€27.2 million) from sales and services and, according to the financial statements, that “includes revenues from sponsorship and from the sale of materials and spare parts of €733,000 [$0.8 million].”
Next up is $59.7 million (€53.6 million) of other revenue which includes prize money as the financial statements say it comes from “the F1 World Championship commercial rights, other revenues from core business and grants for research and development.” Capping it all off is a $10.7 million (€9.6 million) increase in the value of products under development bringing Toro Rosso’s total revenue to $183.6 million (€164.8 million) as shown in the table below.
Toro Rosso's financial statements reveal how much it costs to keep its wheels turning
F1’s prize money is paid in arrears the year after it is earned so Toro Rosso’s haul in 2018 was based on its seventh place in 2017. Since then it has finished in ninth and sixth place which was its joint-best ever result. The previous record came in 2008 when the team won its first and only race since it was founded in 1985 by Italian entrepreneur Giancarlo Minardi.
Red Bull bought the team in 2005 and has used it to train drivers, get another seat at the negotiating table and rev up the exposure of its brand. It will get an even bigger boost this year when Toro Rosso is renamed AlphaTauri after a clothing brand connected to Red Bull.
According to the financial statements, investments in tangible assets including new production machinery, new hardware and track equipment came to $5.7 million (€5.1 million) in 2018. A further $0.8 million (€0.7 million) was spent on intangible assets, such as new software, but that was just the start.
The financial statements reveal that “purchases of materials used to build the F1 cars, team clothing, stickers for F1 cars and other consumables” had a high-octane cost. It came to $56.5 million (€50.7 million) and was followed by “costs for car transport services, race car driver and team travel and lodging expenses,
maintenance and repair of equipment and other operating assets, race car driver fees, consultancy and professional services, advertising services and other general services, such as electricity, mail, telephone, etc.” They are grouped under the category of services and cost $45.6 million (€40.9 million) in 2018.
Toro Rosso uses 1.6 liter V6 turbo engines which are made by Honda and cost an estimated $17 million annually. It is shown in the category of use of third party assets which also includes “leases of flats and production sheds, rental of cars and other goods, royalties for patents, licences and concessions and championship services. Lastly, it includes rental of test circuits.” It comes to a total of $22.6 million (€20.3 million) and is just behind staff costs at $40 million (€35.9 million).
The staff breakdown is also far more detailed than the ones found in British financial statements which tend to have just two categories. In contrast, Toro Rosso’s filings reveal that the team has four managers, 14 junior managers, 190 white collar workers and 102 blue collars giving a total of 310.
The remaining expenses are the smallest and include $8.5 million (€7.6 million) of non-cash charges and $1.4 million (€1.3 million) of other operating costs such as the team’s entry fee to the F1 championship. It brings the costs to a total of $181.1 million (€162.5 million) leaving it with a $2.5 million (€2.3 million) operating profit.
Then comes $0.3 million (€0.3 million) of financial income and $1 million (€0.9 million) of tax giving Toro Rosso a $1.8 million (€1.7 million) net profit. So it makes money as well as driving exposure for Red Bull and that really is the winning formula.
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