Iceland's financial crash hits Williams Formula One profits

Profits at the Williams Formula One team fell 50% to £4.5 million before tax last year after it lost sponsorship money from the bankrupt Icelandic investment company Baugur.

The results were revealed in the Oxfordshire-based team's accounts for the 13 months to December 31 and, despite the reporting period being one month longer than the previous year, its turnover was down 13.8% to £108.3 million.

The Williams car and team shirts carried logos of Baugur-owned brands in 2008, including the toy-shop Hamleys and the jeweller Mappin & Webb. Baugur owed Williams £10 million for the sponsorship but failed to pay up when it hit financial difficulties.

Iceland's Glitnir bank guaranteed to honour Hamleys' obligation but it was taken over by the Icelandic government and Williams still had not received the money by the end of last year.

Last year Williams used its reduced profits to pay down debt and the team finished the year with cash of £3.9 million compared with net debt of £25.5 million at the end of 2008. However, the accounts state that this position is expected to worsen because £14.6 million of the income it received last year was attributable to 2010.

This comes at a bad time for Williams, as it will lose an estimated £11 million of sponsorship at the end of this year when the Royal Bank of Scotland ends its partnership with the team.

On-track, Williams faces an equally rocky road. Last year it finished seventh in the constructors' championship and so far this season is sitting one place lower.

Despite its poor performance its highest-paid director, believed to be team principal Frank Williams, got a pay rise from £975,000 to £1.1 million. Williams is the majority owner of his eponymous team with a 63% stake but last year he sold 7% of his equity as Austrian motorsport entrepreneur Christian Wolff became a shareholder.