Liberty boss: F1 balance sheet 'very strong' despite record loss

Liberty Media chief executive Greg Maffei dispelled investors' worries over Formula 1's financial health in the wake of its record loss for 2020, insisting the sport boasts a "very, very strong" balance sheet.

The Formula One Group posted a $386m loss for 2020 as the sport's overall revenue declined by 44% relative to 2019, a downturn generated by the impact on F1's disrupted season of the global coronavirus pandemic.

Formula One wasn't the only Liberty Media business to take a significant financial hit last year, with the Atlanta Braves baseball team and concert promoter Live Nation also suffering significant losses for the calendar year.

However, as a well-capitalized entity, Formula One has weathered the storm while Maffei expects an upturn in revenue this year as spectators return to the grandstands and race promoters' fees are brought back in line.

"I think one of the things about being part of the Liberty group is we have the ability to hopefully look ahead and be thoughtful with the benefit of our operating companies," Maffei said in a conference call with Wall Street analysts last week.

"The F1 balance sheet is very, very strong. I think the operating levels that we have in our agreements are fine. So I'm not really worried about the balance sheet."

Maffei said that Liberty Media's various businesses are preparing for the economy to reopen as COVID-19 dissipates. But the executive admitted that attendance rates for F1 are not set to instantly recover this season.

"We certainly aren't in the crystal ball business exactly," he said. "But we are in the business of trying to prepare to make sure we benefit when it does open, and that we're prepared if that doesn't happen at the rate of change or pace that we would like.”

"We're going to have a variety of alternatives where fans will be to some degree there," he said. "And I don't think it will be binary, we're not necessarily going to see zero to 100.

"But we'll be somewhere potentially in between. So I'm more optimistic as we go to the end of the year that we're going to get to 100 percent of capacity.

"I think promotion [income] will be still reduced in ‘21, certainly versus what we would have in a non-pandemic year. We will have restricted audiences, and restricted fans at some of our events.

"We're not here to make a forecast, in part because some of this is still up in the air, floating around. It'll definitely be impacted, the amounts to which we'll see."

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Maffei believes that broadcast rates which also dwindled in 2020 due to the disrupted season should be back to normal in 2021 given F1's 23-race schedule.

"We expect a fairly normal broadcast revenue stream in light of our 23 races," he said. "Again, no crystal ball about exactly how COVID plays out.

"But our goal was to try and take the pain in ‘20, to the degree that we rightly had to make concessions to some of our broadcasters – our goal was to do as much as possible make that a '20 event and bring '21 back to normal.

"That is our hope and our expectation. But COVID could change that, as a warning."

Finally, Liberty's chief executive offered a projection for F1's new Concorde Agreement, insisting the terms of the new covenant that links teams to the sport will lead to better profitability in the future.

"Going forward, with the new Concorde Agreement we have a structure which as we increase profitability, we have the opportunity to take back some of what historically F1 earns," explained Maffei.

"Over the years, the rates get a little more attractive for us. Whether we'll hit that in ‘21, given the risks around pandemic, I'm not as confident.

"But in the years going forward, as we continue to have a fully healthy business, I do believe our share of the margin will slightly increase."

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