So That’s How Rover Did It.

As people crawl all over the Rover accounts interesting little snippets are coming out. One question is how did the holding company make profits while the operating companies were recording huge losses?

The company at the centre of the web is Techtronic. It is run by the Phoenix Four but owned by their holding vehicle PVH. The reason it occupies a central place in the story is that, according to its accounts for 2003, the latest available, it owns the entire share capital of MG Rover Group.

It is also the company that holds the £427m loan granted by BMW on handover. A note to the PVH accounts says that the BMW loan is interest free and is not repayable till 2049. However, another note to the Techtronic accounts for 2003 shows that the company charged interest of £10.9m to other group companies that year and £10.1m in 2002.

Those figures neatly match interest payments made by MG Rover on "loans from group undertakings" (of £10.9m in 2003 and £10.1m in 2002). Another note reveals that MG Rover had loans from "group undertakings" of £411.5m in 2003 and £391.5m the previous year.

Anyway, these interest payments meant that - while MG Rover was heavily loss-making - Techtronic made a pre-tax profit of £11.6m in 2003 and was proposing to pay dividends of £32.5m. The previous year it made a similar profit and paid dividends of £18m.

Seems pretty clear there, eh? Someone lends you half a billion interest free and you then loan it on with interest. Do that for a few years and you’re pretty wealthy.