Information  X 
Enter a valid email address

Broadgate Investment (BGTG)

  Print      Mail a friend

Wednesday 22 May, 2002

Broadgate Investment

Interim Results

Broadgate Investment Trust PLC
22 May 2002



BROADGATE INVESTMENT TRUST PLC

ANNOUNCEMENT OF UNAUDITED INTERIM RESULTS

for the six months ended 31 March 2002

Chairman's Statement



As shareholders will know, the fall in the Stockmarket has caused problems in
varying degrees for split capital investment trusts. Broadgate was always
intended to be a highly geared trust with substantial borrowings but with a high
quality equity content. As a result of the sharp fall in the market the loan
terms were breached and the Directors deposited cash with the Company's bankers
as a temporary off-set arrangement. However, when there was no sharp recovery in
the market in sight and despite considerable efforts by your Board to find a
suitable corporate solution, it was decided to repay the loan in full in March
2002. A small advantage was gained in delaying the repayment in that the
breakage costs were lower. The Directors also intend to repay the Equities Index
Unsecured Loan Stock.

With this Interim Report you will receive a Notice of an Extraordinary General
Meeting and various Class Meetings which have been convened for 25 June 2002
where the Directors are seeking authority from shareholders to purchase for
cancellation the Company's Zero Dividend Preference shares. The Directors feel
that such authority will be of benefit to both classes of shareholders and you
are asked to support this proposal. The Directors are also reviewing the
allocation of management expenses as between revenue and capital.

Following the liquidation of a significant part of the portfolio in order to
raise cash to repay the bank debt, the relative performance has suffered, but
the Managers are aware that they start with a clean sheet from the date of
repayment of the Loan Stock and their performance will be monitored accordingly.

Sales from the portfolio were made from the fixed interest stocks which had
performed well and from equities, with a small amount from income shares. This
leaves a relatively small fund which is ungeared although some small gearing
could be considered in the future, consisting of 68% in FTSE 100 and FTSE MidCap
stocks, 9% in bonds, 9% in investment trust income shares and 14% cash as at the
date of this report, which gives scope for future capital appreciation.

The Directors consider that at present it is in the best interests of both
classes of shareholders to remain predominantly invested in equities.

At the current level of the Company's total assets, the Company continues to be
prohibited under Section 264 (1) of the Companies Act 1985 from paying dividends
on its Ordinary Shares, as previously announced.

The Trust has a remaining life of over five years and if markets recover in this
period and Zero Dividend Preference shares can be bought in at beneficial
levels, then the asset value could rise substantially.

These factors could help to bring about the re-commencement of a modest level of
dividend. If dividend payments were to be resumed, it is likely that they will
be at levels considerably lower than those paid prior to the prohibition of such
payments.

The last few months have been a difficult time for the Company and the Directors
have had the problems and possible solutions to those problems under constant
review. The Directors will continue to be alert to any other initiatives that
would be of benefit to shareholders, as well as containing expenses as much as
possible.

Investment Review: Equity Growth Portfolio

The period under review has seen weak performances from the UK market in line
with poor performances from global equity markets generally. The key driver for
these weak markets was the deteriorating economic environment. This weak
performance was exacerbated by the tragic events in the United States on
September 11. Later in the period a number of stock specific issues on an
international basis, notably the collapse of Enron, focused investors minds on
accounting issues further unsettling markets that were already jittery. Emerging
market concerns proved a dominant theme in the period driven by the
deterioration of the Argentine economy.

The events of September 11 created significant uncertainties both economically
and politically. Primary concerns were the impact of these tragic events on
economies that were already weakening significantly and especially the impact on
the US consumer. Central banks reacted swiftly with the US Federal Reserve and
the European Central bank cutting interest rates sharply. A combination of the
interest rate cuts, a carefully executed response to the attacks by the US
government, and investors increasingly viewing the events as a one off event saw
equity markets bounce back. As the period progressed central banks continued to
cut interest rates with rates in the US falling to 1.75% and in the UK to 4.0%
in 2001 although they have remained static so far in 2002 Economic leading
indicators have begun to improve and consumer confidence levels returned to
levels last seen prior to September 11. Investors then began to anticipate
economic recovery.

Investment Review: Revenue Portfolio

During the last quarter of 2001, we saw a de-rating of the split capital market
driven partly by negative sentiment to the stockmarket as a whole following the
events of September 11. With a reducing asset base, the inherent gearing in a
number of trusts exacerbated the downward effect on the prices of splits. This
had a knock-on effect on sentiment which further reduced the liquidity in the
sector. The decline in prices has led to a number of trusts either breaching or
becoming close to breaching their banking covenants and this has resulted in a
number of instances in difficulties in maintaining the level of dividends
previously paid and in some cases their suspensions (as is the case with your
Company).

A secondary downturn came in the first quarter of 2002 with concern that the
failure of a trust to reconstruct and the inability of another to roll-over
sufficient of its zeros to allow it to continue in existing form weighed heavily
on the market as forced sales of investments became a possibility. This resulted
in a number of other trusts nearing their banking covenants. This fear has been
partly allayed, as the lending banks have continued to remain supportive. If
this remains the case, then what the sector most needs is some asset growth from
the underlying investments which would put some distance from any potential
beaches of banking covenants and allow the resumption of dividend payments,
albeit at a reduced level.

Many trusts are not affected by these issues and are relatively robust. However,
the factors affecting those trusts that are substantially invested in other
trusts and those that are highly geared are having a negative effect on the
sector as a whole.

Outlook

Global GDP and Industrial Production growth are likely to have bottomed in early
2002; the combination of last year's dramatic monetary and fiscal policy easing
should allow a moderate recovery in 2002. Earnings risk is abating with the
momentum of earnings disappointments declining and the ratio of positive to
negative earnings surprises becoming more favourable for investors.

Given increasing evidence of economic recovery, certain sectors in the UK market
have scope to make further progress. The aggressive response by companies
throughout the period of economic slowdown provides a strong base upon which to
benefit from an improving macro economic backdrop. UK equities remain good value
on most fundamental valuation measures and attractive relative to gilts.
Liquidity remains high and is a powerful theme given the relative returns on
cash from here versus equities. A number of companies such as GlaxoSmithKline,
AstraZeneca and Diageo amongst others are embarking on multi billion pound share
buybacks reducing equity supply, while corporate activity is returning as
instanced by the offer by Shell for Enterprise Oil and the bid for Innogy by RWE
of Germany. Against this backdrop, UK equities are set to deliver attractive
returns through 2002.

John E. Redwood

Chairman

22 May 2002



STATEMENT OF TOTAL RETURN (UNAUDITED)
(Incorporating the Revenue Account of the Company*)

                                                     Six months ended                       Six months ended
                                                       31 March 2002                         31 March 2001
                                                Revenue      Capital       Total      Revenue      Capital        Total

                                                  £'000        £'000       £'000        £'000        £'000        £'000
Losses on investments                                 -      (3,189)     (3,189)            -     (10,140)     (10,140)
Income                                            1,258            -       1,258        1,921            -        1,921
Investment management fee                          (47)        (142)       (189)         (65)        (195)        (260)
Other expenses                                    (225)            -       (225)        (106)            -        (106)
Net return before finance costs and                 986      (3,331)     (2,345)        1,750     (10,335)      (8,585)
taxation
Interest on Unsecured Loan Stock 2007              (20)         (59)        (79)         (24)         (72)         (96)
Interest payable and similar charges              (660)      (1,979)     (2,639)        (262)        (783)      (1,045)
Appropriations in respect of Unsecured                -        (475)       (475)            -          695          695
Loan Stock 2007
Return on ordinary activities before                306      (5,844)     (5,538)        1,464     (10,495)      (9,031)
taxation
Tax on ordinary activities                        (256)          256           -        (144)          144            -
Return on ordinary activities after                  50      (5,588)     (5,538)        1,320     (10,351)      (9,031)

Taxation
Movement in reserves attributable to Zero
Dividend
Preference shareholders                               -        (404)       (404)            -        (374)        (374)
Provision for shortfall in assets                     -        2,639       2,639            -            -            -
Return attributable to Geared Ordinary               50      (3,353)     (3,303)        1,320     (10,725)      (9,405)
                                                     
Shareholders
Dividends and other appropriations:
Dividends in respect of equity shares             (325)            -       (325)      (1,171)            -      (1,171)
Transfer (from)/to reserves                       (275)      (3,353)     (3,628)          149     (10,725)     (10,576)
Return per share (pence):
Zero Dividend Preference                              -      (43.62)     (43.62)            -         7.30         7.30
Geared Ordinary - basic and diluted                0.19      (12.89)     (12.70)         5.07      (41.23)      (36.16)


* The revenue column of this statement is the revenue account of the Company.

The statement of total return is presented as recommended by the Statement of
Recommended Practice for Financial Statements of Investment Trusts Companies.



SUMMARISED BALANCE SHEET
                                                                                     At              At               At
                                                                            31 Mar 2002     31 Mar 2001    30 Sept. 2001
                                                                            (unaudited)     (unaudited)        (audited)
                                                                                  £'000           £'000            £'000
Fixed assets
Investments                                                                      12,060          57,891           38,437
Current assets
Debtors                                                                             643           1,275            3,934
Cash at bank                                                                        856              17            5,855
                                                                                  1,499           1,292            9,789
Creditors: amounts falling due within one year                                  (5,783)         (1,490)         (29,469)
Net current assets/(liabilities)                                                (4,284)           (198)         (19,680)
Total assets less current liabilities                                             7,776          57,693           18,757
Creditors: amounts falling due after more than
one year
Bank loan                                                                             -        (27,900)                -
Loan Stock
Equities Index Unsecured Loan Stock 2007                                              -         (2,500)          (2,500)
Redemption reserve                                                                    -         (3,430)          (2,618)
                                                                                      -         (5,930)          (5,118)
Total net assets                                                                  7,776          23,863           13,639
Share capital and reserves
Called-up share capital                                                          11,627          11,627           11,627
Share premium                                                                         -          22,820           22,820
Special Reserve                                                                  22,820               -                -
Other capital reserves:
Redemption reserve                                                                1,459             666            1,055
Capital reserve - realised                                                     (14,251)           (570)          (4,289)
Capital reserve - unrealised                                                   (13,878)        (10,864)         (17,848)
Revenue reserve                                                                     (1)             184              274
Total shareholders' funds                                                         7,776          23,863           13,639
Attributable to:
Equity shareholders                                                                   -          14,241            3,628
Non-equity shareholders                                                           7,776           9,622           10,011
                                                                                  7,776          23,863           13,639
Net asset value per share (pence) :
Geared Ordinary - basic and diluted                                                   -           54.75            13.95
Zero Dividend Preference                                                         151.75          187.78           195.37
Value of one unit of Equities Index
Unsecured Loan Stock 2007 (pence) :                                              255.74          271.14           234.02



CASHFLOW STATEMENT (UNAUDITED)
                                                                              Six months ended         Six months ended
                                                                                 31 March 2002            31 March 2001
                                                                                         £'000                    £'000

Net cash inflow from operating activities                                                1,252                    1,354
Net cash outflow from servicing of finance                                             (3,012)                  (1,137)
Net tax recovered                                                                            -                       28
Net cash inflow from financial investment                                               25,611                    1,307
Equity dividends paid                                                                    (910)                  (1,171)
Management of liquid resources                                                           5,508                        -
Net cash inflow before financing                                                        28,449                      381
Net cash outflow from financing                                                       (27,940)                        -
Increase in cash                                                                           509                      381
Reconciliation of operating revenue to net cash inflow
from operating activities
Net revenue before interest payable and taxation                                           986                    1,750
Decrease/(increase) in accrued income                                                      403                    (171)
Decrease in other debtors                                                                    -                        1
Increase/(decrease) in creditors                                                             7                      (6)
Capital expenses taken to non-distributable reserves                                     (142)                    (195)
UK income tax deducted at source                                                           (2)                     (25)
Net cash inflow from operating activities                                                1,252                    1,354
Reconciliation of net cash inflow to movement in net debt
Increase in cash as above                                                                  509                      381
Cash outflow from repayment of loans and overdrafts                                     27,940                        -
Cash inflow from liquid resources                                                      (5,508)                        -
(Increase)/decrease in valuation of debt                                                 (475)                      695
Movement in net funds in the period                                                     22,466                    1,076
Net debt at 1 October                                                                 (27,203)                 (35,244)
Net debt at 31 March                                                                   (4,737)                 (34,168)
Represented by:
Cash at bank and overdrafts                                                                856                    (338)
Debt falling due within one year                                                       (5,593)                        -
Debt falling due after one year                                                              -                 (33,830)
                                                                                       (4,737)                 (34,168)


NOTES TO THE ACCOUNTS

 1.  Dividends

     On 24 January 2002 the Company declared a first interim dividend in respect
     of the year ending 30 September 2002 of 1.25p (net) per Geared Ordinary 
     share, which makes a total of 1.25p (net) per Geared Ordinary share for the 
     half year ended 31 March 2002 (2001 - 4.5p).The first interim dividend was 
     paid on 19 February 2002 to shareholders on the register at the record 
     date, being 1 February 2002. On 27 February 2002 the Company announced that 
     in light of the decline in assets, the Company was no longer able to 
     satisfy the net assets test in Section 264(1) of the Companies Act 1985. 
     Accordingly, the Company is prohibited from paying dividends on the Geared 
     Ordinary shares.


 2.  Distribution and the revenue reserve balance 

     The distribution made during the period was made by reference to interim
     accounts, filed with the Registrar of Companies as provided by s.272 of the 
     Companies Act 1985, which showed sufficient distributable reserves at the 
     date of the distribution. The timing of the Company's income and expenses
     since that date has been such that the revenue reserve at 31 March 2002
     amounts to a small debit balance of £405 (presented in the balance sheet as 
     £1,000 due to rounding).


 3.  Income

     The breakdown of income for the periods 31 March 2002 and 31 March 2001 was
     as follows:

                                                                31-Mar           31-Mar
                                                                 2002             2001
                                                                 £'000            £'000
    Income from investments
    Franked investment income (net)                               312              915
    Unfranked investment income                                   253              782
    Overseas dividends                                            492              192
                                                                 1,057            1,889
    Other income
    Deposit interest                                              201              31
    Underwriting commission                                        -                1
                                                                  201              32
    Total income                                                 1,258            1,921


 4. Provision for shortfall in assets
                                                        Six months ended                     Six months ended
                                                            31-Mar-02                         31 March 2001
                                                 Revenue      Capital      Total      Revenue     Capital     Total
                                                  £'000        £'000       £'000       £'000       £'000      £'000
    Provision for shortfall in assets
    attributable to ZDP shareholders                -          2,639       2,639         -           -          -

     The provision for the shortfall in assets attributable to the ZDP 
     shareholders has arisen as a result of the declines in the value of the 
     Company's investment portfolio during the period, the capital attributable 
     to equity shareholders having been written down to £nil.


 5.  Return per share

     The basic revenue return per Geared Ordinary share is based on net revenue
     on ordinary activities after taxation of £50,000 (2001 - £1,320,000) and on 
     26,012,500 (2001 - 26,012,500) Geared Ordinary shares, being the weighted 
     average number of Geared Ordinary shares in issue during the period.  The 
     basic capital loss per Geared Ordinary share is based on net capital losses 
     attributable to Geared Ordinary shares, after appropriations in respect of 
     the Equities Index Unsecured Stock 2007, Zero Dividend Preference shares 
     ('ZDP') and provision for the shortfall in assets, giving net capital 
     losses of £3,353,000 (2001 - loss of £10,725,000), and on 26,012,500 (2001 
     - 26,012,500) Geared Ordinary shares, being the weighted average number of 
     Geared Ordinary shares in issue during the period. The loss per ZDP share 
     is based on the movement in reserves attributable to ZDP shareholders, 
     calculated as per the Articles of Association, of £404,000 (2001 - 
     £374,000) less the provision for shortfall in assets of £2,639,000 (2001 - 
     shortfall £nil) and on 5,124,200 (2001 - 5,124,200) ZDP shares,  being the 
     weighted average number of ZDP shares in issue during the period. The fully 
     diluted return per Geared Ordinary share is the same as the basic return.


 6.  Valuation of Investments

     In accordance with the established accounting policy, fixed asset  
     investments have been valued for the purposes of the summarised balance 
     sheet at 31 March 2002 at middle market prices. Certain fixed asset 
     investments, comprising of shares in other investment companies and 
     corporate bonds, are subject to a deficiency of liquidity in the market for 
     those investments as a result of current prevailing market conditions. The 
     value of investments potentially affected by deficient market liquidity 
     amounts in total to £2,512,188. While the Directors recognise that, in 
     current conditions, there is uncertainty as to the ability to realise some, 
     or all, of these investments at their recorded amounts, they have no 
     intention of doing so in the short term. They believe it appropriate to 
     carry these investments at middle market prices, in accordance with the 
     Company's established policy, as they anticipate the return to normal 
     levels of market liquidity within a reasonable time period.


 7. Loan Stock
                                               31-Mar       31-Mar       30-Sep

                                                 2002         2001         2001
                                                £'000        £'000        £'000
    Equities Index Unsecured Loan Stock 2007    2,500        2,500        2,500

    Covenants entered into with the holders of the Equities Index Unsecured Loan
    Stock 2007 convey entitlements to the Loan Stock holders. Falls in the value
    of fixed asset investments during the period are sufficient to place the
    loan stock in breach of its covenants on 30 September 2002 if the fixed
    asset investment valuations remain unchanged and no action is taken in the
    meantime. In light of this, the Company has declared its intention to repay
    the Equities Index Unsecured Loan Stock by the end of June 2002.


 8 . Appropriations in respect of Equities Index Unsecured Loan Stock 2007
     The appropriations in respect of the Equities Index Unsecured Loan Stock
     2007 are made by reference to an index which is tracked by the loan. 
     Increases in the value of the index give rise to an increase in the 
     appropriation and a capital charge to the Company, while falls give rise
     to a decrease in the appropriation and a corresponding credit.


 9.  Net asset value per share

     The basic net asset value per Geared Ordinary share is based on net assets
     attributable to the Geared Ordinary shareholders and on 26,012,500 (31 March 
     2001 - 26,012,500; 30 September 2001 - 26,012,500) Geared Ordinary shares, 
     being the number of Geared Ordinary shares in issue at the period end.
     Diluted returns per Geared Ordinary share have been calculated in 
     accordance with FRS 14.The existence of Warrants at 31 March 2002, 31 March 
     2001 and September 2001 did not give rise to a dilution of returns, as the 
     average price of the Geared Ordinary shares was lower than the Warrant
     conversion price of 100p and hence no Warrants are deemed to have been
     converted. The net asset value per ZDP share is based on net ZDP 
     shareholders' assets, and on 5,124,200 (31 March 2001 - 5,124,200; 30 
     September 2001 - 5,124,200) ZDP shares, being the number of ZDP shares in 
     issue at the period end.


10.  The financial information for the six months ended 31 March 2002 and 31
     March 2001 comprises non-statutory accounts within the meaning of Section
     240 of the Companies Act 1985.The financial information for the year ended 
     30 September 2001 has been abridged from published accounts that have been 
     delivered to the Registrar of Companies and on which the report of the
     auditors was unqualified. The interim accounts have been prepared on the 
     same basis as the annual accounts.

                                               Aberdeen Asset Management PLC

22 May 2002                                                     Secretaries.





INDEPENDENT REVIEW REPORT BY DELOITTE & TOUCHE TO BROADGATE INVESTMENT TRUST PLC

Introduction

We have been instructed by the company to review the financial information for
the six months ended 31 March 2002 which comprises the statement of total
return, the balance sheet, the cash flow statement and related notes 1 to 10. We
have read the other information contained in the interim report and considered
whether it contains any apparent misstatements or material inconsistencies with
the financial information.

Directors' responsibilities

The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The directors
are responsible for preparing the interim report in accordance with the Listing
Rules of the Financial Services Authority which require that the accounting
policies and presentation applied to the interim figures should be consistent
with those applied in preparing the preceding annual accounts except where any
changes, and the reasons for them, are disclosed.

Review work performed

We conducted our review in accordance with the guidance contained in Bulletin
1999/4 issued by the Auditing Practices Board for use in the United Kingdom. A
review consists principally of making enquiries of management and applying
analytical procedures to the financial information and underlying financial data
and, based thereon, assessing whether the accounting policies and presentation
have been consistently applied unless otherwise disclosed. A review excludes
audit procedures such as tests of controls and verification of assets,
liabilities and transactions. It is substantially less in scope than an audit
performed in accordance with United Kingdom auditing standards and therefore
provides a lower level of assurance than an audit. Accordingly, we do not
express an audit opinion on the financial information.

Fundamental uncertainties

Going concern relating to loan covenants

In forming our review conclusion, we have considered the adequacy of the
disclosures made in the financial information concerning the possible outcome of
the Company's intention to repay the Equities Index Loan Stock 'Loan Stock'.
Covenants in respect of this Loan Stock might be breached on 30 September 2002
if the fixed asset investment valuations remain unchanged and no action is taken
in the meantime. The financial information has been prepared on a going concern
basis, the validity of which may depend upon the Loan Stock being repaid or the
potential covenant breaches otherwise repaired. The financial information does
not include any adjustment that might result from a failure to repay the Loan
Stock or repair the potential breaches. Details of the circumstances relating to
this fundamental uncertainty are described in note 7.

Valuation of investments

In forming our review conclusion, we have considered the adequacy of the
disclosures made in the financial information concerning the basis of valuation
of certain fixed asset investments, where a lack of liquidity in the market for
those investments raises uncertainty as to the realisability of middle market
prices in the current market conditions. The financial information does not
include any adjustments for potential shortfalls that would result from
obtaining a value materially below middle market price for any of the
investments in the event of their disposal. Details of the circumstances
relating to this fundamental uncertainty are described in note 6.

Review conclusion

On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 31 March 2002.

Deloitte & Touche

Chartered Accountants

London

22 May 2002



                      This information is provided by RNS
            The company news service from the London Stock Exchange
                                                  

a d v e r t i s e m e n t