GilesGuthrie
Staff Emeritus
- 11,038
- Edinburgh, UK
- CMDRTheDarkLord
Now, this is really quite interesting. Work with me here, because it's going to take a while. Principal source is itv-f1.com
A company called Interpublic, the world's number two advertising agency is having a slight issue with its share price. It is said that the company is now worth a third of what it had been six months ago. Interpublic owns Octagon, whose motorsport division had been the cause of some serious financial losses.
Octagon is new kid on the motor racing scene, and it was not until 1999 that Octagon really hit the headlines when it acquired Brands Hatch Leisure. This gave Octagon control of most of the major British circuits, except Silverstone, plus the right to host the British Grand Prix. The problem was that Brands Hatch needed massive upgrading before Formula 1 would even look at the place and the local authorities were denying planning permission.
In order to sidestep the problem Octagon pulled off what looked like a rather decent coup at the time by doing a deal with the British Racing Drivers' Club (which owns Silverstone) to lease that circuit for 15 years. Silverstone needed work and it was agreed that Octagon, the BRDC and Formula One Management would combine to each invest £13.5m to upgrade Silverstone over the five-year period between 2001 and 2006.
The first phase of development went ahead as planned and the British government was convinced to speed up some roadworks to ensure that the access roads were up to scratch for this year's event.
All seemed well, but it was apparent that the enhanced traffic flow at Silverstone was probably as much to do with the fact that ticket sales were restricted to just 60,000 (rather than the normal 90,000) as it was to do with the new roads. This was a decision taken by Octagon to make absolutely certain that things went well. Octagon considered that it was worth cutting back on the numbers to make sure that there was no possibility of a traffic jam.
Obviously, even allowing for some fairly frightening price hikes, there was no way that the 60,000 crowd could generate enough income to allow the event to break even. The conclusion was that the costs of the upgrading work, of running the event and of paying the F1 teams to attend meant that the race was bound to make a substantial loss.
The first sign that this had been the case came in August when the circuit issued a most bizarre press release telling the world that the partners in the development of Silverstone were "continuing their efforts on dramatically improving facilities for the paying public" and waffled on about improved signage, better catering and retail facilities and modern toilets. Hidden away in the small print was the fact that the new pit and paddock complex, media centre and race control building was not going to be built before 2004.
The implication, although it was skillfully disguised, was that money was short and this belief was underlined a few days later when the axe went swinging through the management of Octagon and company boss "stepped down".
The scale of the problem popped up when Interpublic issued its second profit warning a few days ago. This was what had caused the share price to tumble. According to the official figures, Octagon Motorsports had made a loss of nearly £12m, largely related to the British Grand Prix. Interpublic's chief financial officer was quoted as saying that the company is "reassessing the composition and structure of our motor sports holdings."
As the BRDC already owns the Silverstone circuit the obvious thing to do if Octagon now decides that it wants to get out of motor racing is for the lease of Silverstone to be transferred to the third partner in the British Grand Prix business, Formula One Management, a company run and part-owned by a Mr Ecclestone of Knightsbridge. A man who has always wanted to get his hands on Silverstone.
A company called Interpublic, the world's number two advertising agency is having a slight issue with its share price. It is said that the company is now worth a third of what it had been six months ago. Interpublic owns Octagon, whose motorsport division had been the cause of some serious financial losses.
Octagon is new kid on the motor racing scene, and it was not until 1999 that Octagon really hit the headlines when it acquired Brands Hatch Leisure. This gave Octagon control of most of the major British circuits, except Silverstone, plus the right to host the British Grand Prix. The problem was that Brands Hatch needed massive upgrading before Formula 1 would even look at the place and the local authorities were denying planning permission.
In order to sidestep the problem Octagon pulled off what looked like a rather decent coup at the time by doing a deal with the British Racing Drivers' Club (which owns Silverstone) to lease that circuit for 15 years. Silverstone needed work and it was agreed that Octagon, the BRDC and Formula One Management would combine to each invest £13.5m to upgrade Silverstone over the five-year period between 2001 and 2006.
The first phase of development went ahead as planned and the British government was convinced to speed up some roadworks to ensure that the access roads were up to scratch for this year's event.
All seemed well, but it was apparent that the enhanced traffic flow at Silverstone was probably as much to do with the fact that ticket sales were restricted to just 60,000 (rather than the normal 90,000) as it was to do with the new roads. This was a decision taken by Octagon to make absolutely certain that things went well. Octagon considered that it was worth cutting back on the numbers to make sure that there was no possibility of a traffic jam.
Obviously, even allowing for some fairly frightening price hikes, there was no way that the 60,000 crowd could generate enough income to allow the event to break even. The conclusion was that the costs of the upgrading work, of running the event and of paying the F1 teams to attend meant that the race was bound to make a substantial loss.
The first sign that this had been the case came in August when the circuit issued a most bizarre press release telling the world that the partners in the development of Silverstone were "continuing their efforts on dramatically improving facilities for the paying public" and waffled on about improved signage, better catering and retail facilities and modern toilets. Hidden away in the small print was the fact that the new pit and paddock complex, media centre and race control building was not going to be built before 2004.
The implication, although it was skillfully disguised, was that money was short and this belief was underlined a few days later when the axe went swinging through the management of Octagon and company boss "stepped down".
The scale of the problem popped up when Interpublic issued its second profit warning a few days ago. This was what had caused the share price to tumble. According to the official figures, Octagon Motorsports had made a loss of nearly £12m, largely related to the British Grand Prix. Interpublic's chief financial officer was quoted as saying that the company is "reassessing the composition and structure of our motor sports holdings."
As the BRDC already owns the Silverstone circuit the obvious thing to do if Octagon now decides that it wants to get out of motor racing is for the lease of Silverstone to be transferred to the third partner in the British Grand Prix business, Formula One Management, a company run and part-owned by a Mr Ecclestone of Knightsbridge. A man who has always wanted to get his hands on Silverstone.
