In the year to 31 December 2001 Phoenix Venture Holdings Group, which includes MG Rover, Powertrain, XPart, MG Sport and Racing and MG Rover Property made a loss before goodwill and tax of £187 million.

This represents a further halving of the annualised loss for 2000 (circa. £380 million), which in itself was half of the level of operating losses incurred in 1999 (circa. £780 million) – the last full year of BMW control.

The year-end saw the Group with a net cash balance of £301m, which compares to £336m at 31 December 2000 (restated from £329m in the previous report to include Phoenix Venture Holdings cash balances at the end of 2000).

“During 2001 the emphasis of the business changed significantly. We are now past the planning stage and into the delivery phase,” said group chief executive Kevin Howe.

“In the light of the 2001 sales outcome we have revised our 2002 outlook. This, together with the continued strength of sterling, means that although we will not break-even this year, the projected result for 2002 will again see a step-change improvement from 2001.”

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In a statement, the group said it made good progress although more would have been achieved, if not for unavoidable and difficult trading circumstances.

The continued strength of the pound against the euro required the decision to be taken not to manufacture and sell certain vehicles that would have made a loss in European markets.

As a consequence retail sales of 170,200 were lower than the business plan target of more than 180,000 units. However, since the overall volume shortfall comprised an over achievement against plan in the UK and an under achievement in European markets, the sterling/euro relationship meant that the overall profit impact was limited.

“Dealer network issues” also affected European market volume.

Profit performance was also affected by the high prices charged for components sourced from companies which were formerly part of Rover Group under BMW ownership. This factor has now been partially mitigated by the acquisition of Powertrain during 2001 and will be further improved when the ownership of the ‘L’ Series diesel engine is finally transferred to Powertrain following the relocation of the production facilities.

Later this year, production of the ZT Ultimate range of vehicles will start. 2004 will see the launch of a new medium car, followed in 2005 by a new small car.

March 2002 saw transfer of overall responsibility for the worldwide parts distribution operation to Caterpillar Logistics but this has been plagued with problems and the company stopped car production for a week to divert parts to dealers.