The company has blamed lower sales caused by the strength of the pound compared to the euro.

Phoenix Venture Holdings, which bought Rover from BMW two years ago, has revealed that it has cut losses at the Birmingham-based car maker by about a half.

The loss of £187m ($289.7m) for last year compared to an estimated figure of £380m in 2000.

But MG Rover sold 170,200 vehicles last year, almost 10,000 fewer than it had forecast.

The sales slow down was blamed on the strength of the pound, which forced MG Rover to ditch plans to sell some models in continental Europe.

"The [exchange rate] required the decision to be taken not to manufacture and sell certain vehicles that would have made a loss in European markets," the firm said.

Group chief executive Kevin Howe said: "In the light of the 2001 sales outcome, we have revised our 2002 outlook.... We will not break even this year."

'Good progress'

However, he said the firm, which lost £780m in 1999 while still in BMW's hands, had nonetheless "come a long way in a short period of time".

"The group made good progress, although more would have been achieved if not for unavoidable and difficult trading circumstances," the company statement added.

Future profitability improvements would be underpinned by the purchase of engine-maker Powertrain, which would help bring down the firm's components bill.

The company said one of its achievements for last year was winning the Auto Trade Magazine and Institute of Transport Management award, for the Rover 75.

Developments are continuing "at a pace" on the firm's tie-up with Chinese minibus maker China Brilliance, with talks being held with both company and government officials.

Phoenix Venture Holdings owns MG Rover, the car racing MG Sport unit, and MG Rover Property, which owns a small number of sites run as MG Rover franchises.