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12th July 2002


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.

Kevin Howe, Group Chief Executive


Year to

Eight months



to 31/12/00




Loss before goodwill and tax



Net cash



Retail sales



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).

Reflecting on a strong performance for the year, Group Chief Executive Kevin Howe said: "This period has been very busy for us all and we have certainly come a long way in a short space of time. During 2001 the emphasis of the business changed significantly. We are now past the planning stage and into the delivery phase.

"We have launched, in an exceptionally short period of time, an extensive new range of models which have been extremely well received by the media and customers, we leave the year with a healthy cash balance, and our forward plans have received a large endorsement as evidenced by the funding obtained from three major UK financial institutions.

"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.

"I would like to thank all MG Rover employees for the realism that they have shown in the past two years and ask everyone, including the dealer body, to work together to fully realise the opportunities presented by our future plans. Together we share the prospect of a challenging but successful and rewarding future."

The Group made good progress although more would have been achieved, if not for unavoidable and difficult trading circumstances. The continued strength of Sterling 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, unique to MG Rover 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.

Achievements in 2001 and outlook for 2002

Just over a year after taking ownership of MG Rover, the company launched the stunning new range of MG saloons together with the Tourer, both in Rover 75 and MG forms. The engineering excellence of these new products was recognised with Rob Oldaker, the MG Rover Product Development Director, receiving the coveted ‘Engineer of the Year’ award from the motoring magazine Autocar. Further accolades have been the ‘Outstanding Achievement’ Award by AutoTrade Magazine and the ‘Car of the Year’ Award for the Rover 75 by the Institute of Transport Management.

Another significant achievement was the acquisition of Rover Financial Services. The major benefits for MG Rover are the ability to control the re-marketing of second hand cars, thereby optimising future residual values. It also provides access to a database of 58,000 customers, creating new marketing opportunities.

The extensive improvements to the Longbridge site have been completed. They include the creation of a prestigious new visitor centre, which was opened by HRH the Princess Royal in January 2002 and a new quality centre. The refurbishment of International Headquarters, the Product Development Centre and the Sales and Marketing Centre were also completed.

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

The Group restructuring started early in 2001 has now been completed. The Group now comprises five major business areas under the holding company Phoenix Venture Holdings (formerly MG Rover Holdings). Each business area now has its own management board and this structure promotes increased focus on their differing business requirements.

March 2002 saw transfer of overall responsibility for the worldwide parts distribution operation to Caterpillar Logistics. This business has an annual turnover in excess of £200m. More recently the group announced the formation of Xpart Limited, to explore new third party opportunities and develop the business.

Success in motor sport came in various forms. Two cars were entered in the 2001 and 2002 Le Mans 24-hour race. Motor sport participation was extended to the British Touring Car Championship, and World Junior Rally Championship.

The group, through its property business, now owns a small number of sites that are run as commercially viable MG Rover franchises. A further remit of the property division is the development of the Longbridge site. St Modwen Properties Plc will develop around 70 acres of surplus land to the joint benefit of the community and MG Rover.

China Brilliance Industrial Holdings Alliance – an update

In March 2002, the long-term strategic alliance was announced. Since then developments have moved on at a pace. Visits have been made to proposed manufacturing sites in China by both senior management and operational staff to help develop the manufacturing plans. During these visits constructive discussions also took place with senior governmental officials from the relevant provinces.

A joint sourcing committee has been set up to work towards the optimisation of material costs for both current and future models. The joint engine strategy is advancing in terms of definition of range, applications and specifications. This is being dovetailed with the proposed model plans of the partners. China Brilliance Industrial Holdings marketing staff have visited MG Rover to share current expertise and develop future plans for the range of models and markets to be covered by the alliance.

Product development work is continuing on the new medium and small cars, which are the key foundation stones of the strategic alliance. All of these actions are being supported by the development of a detailed legal and financial infrastructure necessary to ensure clear processes and controls are in place to manage such a wide-reaching alliance.

The project is advancing on all fronts with great vigour. The first tranche of cash from the joint venture company, formed to fund the new models, has been deposited with MG Rover and we look forward to a productive period converting the opportunities into reality.

Issued by MG Rover Group Communications

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