OCTOBER 18, 2002

The problems at Octagon Motorsports

The Interpublic Group of Companies is the world's second biggest advertising company but in recent months its results has been adversely affected by its involvement in motorsports. The firm has just given its second profit because of the problems it is encountering at Octagon Motorsports.

The management of Octagon Motorsports was changed in August but the losses encountered will still have a serious effect on Interpublic's overall earnings. Most of the problems can be traced back to the British Grand Prix which has caused the company serious losses. Octagon Motorsports also manages the British circuits of Brands Hatch, Silverstone, Oulton Park, Cadwell Park and Snetterton.

The deal with Silverstone is a 15-year rental agreement which began in January 2001 and which contracted Octagon to invest an estimated $60m in the five years up to January 2006. This was to be divided between Octagon, the Formula One group and the BRDC, the organisation which owns the track.

According to the official figures, Interpublic recorded a loss of $16.2m this summer, largely related to the British GP.

"We were penalized by poor results at certain sports properties within our Octagon unit and recognition of asset impairment charges for those properties," said Sean Orr, Interpublic's Chief Financial Officer.

Initially the problems were expected to drop earnings by around four percent but more recent analysis has revealed that the impact could be as high as 20%.

"We are currently reassessing the composition and structure of our motor sports holdings," Orr said.