Phoenix Venture Holdings' report for 2002 features turnover up year on year from £1,697m to £1,741m, a loss before goodwill, tax and income from group undertakings of £95m, down from £187m, and net cash of £315m, up from £310m in 2001.

Kevin Howe, Group Chief Executive of Phoenix Venture Holdings, commented: "Going forward we will remain focused on continuing to reverse the loss situation within MGRover and growing and developing our other businesses."

Phoenix's report to shareholders said the results within MG Rover Group, albeit in line with expectations, had been hampered by a number of key factors: “The year 2002 (and indeed 2003) was always going to be tough for MG Rover Group. After the excitement and euphoria associated with an entirely new company and the launch of a new range of MG Cars and the Rover 75 Tourer we entered a period of consolidation and planning and development of new models.

“The company's performance in 2002 was not helped by the reduction in automotive market volumes in Europe and the relative weakness of the Euro against Sterling. Furthermore, MG Rover was affected by the much publicised problems with the China Brilliance Joint Venture which we have since terminated as a result of the non-receipt of payments due to MG Rover from the Chinese partner.

“In addition, the fact that TWR – our main engineering contractor on the new medium car development programme – was placed into administration brought further delays to this key programme. Together with the China Brilliance problem this caused us to take 'time-out' on the new medium car to assess the status of that programme, establish a new and improved development methodology and confirm the funding extent.

“Despite these problems PVH left the year with a healthy cash balance – more, indeed, than at the end of 2001, whilst achieving our forecast result – a loss measured in 'tens of millions of pounds'. Nevertheless, the loss-making situation within MG Rover, forecast to continue into 2003, clearly needs to be reversed. An extensive programme of improvement actions has been put in place in 2003 (mainly focused on Sales and Marketing activities). A significant part of this process was to appoint John Edwards – an original member of the Phoenix Consortium – to be directly in charge of the MG Rover Group Sales and Marketing function.

“MG Rover's losses constitute a drain on the group's substantial cash resources and whilst this can be sustained in the short term, MG Rover must start to contribute positive trading results to the group.

“We have recently announced and are in the process of launching two cars at the smaller end of the market – the CityRover and Streetwise, which will boost both company and dealer profits. Nevertheless, the next two years, until the launch of the new medium car will be a period of rigorous cost and cash controls in a very competitive market place, whilst investing in new facilities and tooling for the new models.” Kevin Howe also confirmed that, “In another series of discussions, talks with the Polish government are still progressing in respect of the re-opening of a vehicle manufacturing facility in Warsaw and a conclusion is imminent.”