Williams delivered a robust performance in 2017, with both the core operations making progress.
The F1 operation increased revenues by 7.6% to £125.6m. Increased sponsorship receipts more than offset reduced commercial rights income, reflecting the fifth-place finish in the 2016 Constructors’ Championship compared to third in 2015. Other operating income also increased 72.4% to £16.0m, as a one-off payment relating to a driver was received.
Revenues grew by 7.0% at WAE to £39.5m continuing the track record of growth in recent years. Sales relate to engineering consultancy projects as well as low-volume manufacturing of bespoke products and some royalty income.
Other revenue fell £12.7m to £1.1m in the absence of income from a major one-off project in 2016.
Overall group revenues were down just 0.7% to £166.2m.
Exhibit 1: Williams Grand Prix Holdings income statement
12 months to December |
H116 |
H216 |
FY16 |
H117 |
H217 |
FY17 |
FY change |
Revenue |
|
|
|
|
|
|
|
Formula One |
51.4 |
65.3 |
116.7 |
65.5 |
60.1 |
125.6 |
7.6% |
WAE |
20.6 |
16.4 |
36.9 |
19.9 |
19.7 |
39.5 |
7.0% |
Other |
8.1 |
5.7 |
13.8 |
0.5 |
0.6 |
1.1 |
-92.0% |
Group total |
80.0 |
87.4 |
167.4 |
85.9 |
80.4 |
166.2 |
-0.7% |
Gross profit |
51.1 |
58.3 |
109.4 |
53.9 |
45.9 |
99.8 |
-8.8% |
Gross margin |
63.8% |
66.7% |
65.3% |
62.7% |
57.1% |
60.0% |
-8.1% |
EBITDA |
|
|
|
|
|
|
|
Formula One |
4.1 |
8.3 |
12.4 |
10.1 |
5.9 |
16.0 |
29.4% |
WAE |
3.5 |
0.7 |
4.2 |
3.4 |
1.6 |
5.0 |
19.2% |
Other |
0.1 |
-1.2 |
-1.1 |
-3.1 |
-7.1 |
-10.2 |
824.5% |
EBITDA |
7.7 |
7.8 |
15.5 |
10.4 |
0.4 |
10.8 |
-30.2% |
Depreciation |
-1.7 |
-2.4 |
-4.1 |
-2.7 |
-2.8 |
-5.5 |
34.1% |
Amortisation |
-0.1 |
-0.2 |
-0.3 |
-0.2 |
-0.3 |
-0.6 |
123.4% |
EBIT |
5.9 |
5.2 |
11.2 |
7.4 |
-2.7 |
4.8 |
-57.2% |
Share based payments |
-0.5 |
-0.1 |
-0.6 |
-0.4 |
-0.8 |
-1.2 |
92.1% |
Movement in derivative financial instruments |
-2.7 |
-1.0 |
-3.7 |
2.6 |
1.4 |
4.0 |
n.m. |
Exceptional item |
|
|
|
|
7.3 |
7.3 |
|
Net interest |
-0.5 |
-0.4 |
-0.9 |
-0.4 |
-0.4 |
-0.8 |
-10.9% |
Profit before tax (as reported) |
2.2 |
3.7 |
5.9 |
9.3 |
4.8 |
14.1 |
138.1% |
Net income (as reported) |
2.2 |
3.7 |
5.9 |
9.3 |
4.8 |
14.1 |
138.1% |
EPS (as reported) (p) |
22.1 |
37.4 |
59.5 |
94.0 |
47.7 |
141.8 |
138.4% |
Gross profit fell by almost £10m to £99.8m largely reflecting the reduced project work in the Other segment. The gross margin was 60.0% compared to 65.3% in 2016.
Group EBITDA fell 30% to £10.8m (FY16 £15.5m) but was up strongly in both F1 (up 29.4% at £16.0m) and WAE (up 19.2% at £5.0m). The shortfall came in the other segment, which includes Heritage and conference centre activities but also benefited in 2016 from delivery of a highly profitable project that did not recur. As a result, the EBITDA loss in other increased from £1.1m to £10.2m.
At the PBT level the group benefited from the property disposal profit which combined with the non-cash mark-to-market reversal of derivative financial instruments from a £3.7m loss in 2016 to a credit of £4.0m in 2017. Overall reported group PBT rose 138.1%, and with no tax payable in either year, so did net income. Due to a slightly lower average share count the EPS rose 138.4% to 141.8p (FY16 59.5p).
If we calculate an adjusted EPS figure excluding the derivatives movement, share-based payments and the exceptional items, the adjusted EPS figure for 2017 was 39.7p compared to 103.0p in 2016. We felt this gives a better reflection of the underlying operational performance of the group during the year although 2016 was affected by the one-off project receipts.
As expected, no dividend was declared; this remains a low priority in the capital allocation policy at present. Investment is targeted at making the racing team more competitive and successful, as well as improving and exploiting the technical capabilities of WAE to organically grow the business.
In terms of balance sheet development, the most notable aspect during 2017 was the sharp reduction in net debt, which fell from £36.1m at the start of the year to just £17.5m at the year end. This was largely due to an improved operational cash performance but was also enhanced by the property disposal. The net asset value at the year end was £46.6m
Exhibit 2: Williams Grand Prix Holdings summary balance sheet summary
Year end Dec (£m) |
2012 |
2013 |
2014 |
2015 |
2016 |
2017 |
Fixed assets |
40.3 |
66.1 |
66.6 |
64.1 |
67.1 |
65.3 |
Current assets |
57.5 |
31.8 |
30.5 |
40.6 |
61.7 |
59.4 |
Total assets |
97.8 |
97.8 |
97.1 |
104.7 |
128.8 |
124.7 |
Total non-current liabilities |
(3.2) |
0.0 |
(20.0) |
(13.1) |
(10.7) |
(11.4) |
Total current liabilities |
(57.4) |
(25.7) |
(41.6) |
(66.5) |
(86.7) |
(66.7) |
Total liabilities |
(60.6) |
(25.7) |
(61.6) |
(79.7) |
(97.3) |
(78.1) |
Net assets |
37.2 |
72.1 |
35.6 |
25,0 |
31.5 |
46.6 |
Williams Grand Prix Holdings remains unique as the only F1 racing team to be quoted. The performance of the team is thus very high profile and visible to investors. With the strategy unchanged to pursue further FIA Constructors’ Championship titles in the future, the importance of developing the growing and recurring profitability of WAE remains undiminished. However, in the near term, the share of commercial rights determined by racing performance remains the largest determinant of financial performance. With the competition clearly intensifying this year, maintaining a fifth-place position seems likely to be challenging, which could affect FY19 performance. In addition, as the main sponsorship deal with Bacardi comes to a conclusion at the end of the season and the group is looking for a new sponsor, this adds another element of uncertainty to the mix. A favourable resolution of this issue would be a welcome factor for investors.
While the pot may get bigger under Liberty Media’s control, ultimately a rebalancing of the distribution amongst the teams in the medium term would provide a sounder footing for investors. Achievement of this while maintaining the structure of the competition is still far from a given, as the commercial power of the leading teams is significant.
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