Hipgnosis Songs scraps dividends until next financial year
The trust said the suspension of dividend payments will provide the company with the «headroom required» to avoid breaching its covenants.
The trust explained its catalogues' bonus provision is expected to grow by $23m to $68m as of 30 September 2023, as there are now ten out of its 146 catalogues «likely to meet performance hurdles» — up from six in March, it said in a regulatory filing today (6 November).
SONG explained the $68m would be payable over three years from 30 September 2023. More specifically, $40m are due within 12 months, $24m due within one to two years, and $4m due within two to three years.
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The trust added there are also an additional 19 catalogues with active bonus provisions of $75m, which are «unlikely to meet performance hurdles», although they are not recognised as provisions, rather as contingent liabilities and will be disclosed in the trust's forthcoming interim results.
SONG's board is also «exploring refinement to the methodology» adopted in its revenue accrual estimates for the year-end results, which may result a reduction of revenue accruals by up to 10%.
The trust added: «In light of this information, the board has determined that it will not declare dividends before the new financial year. The operating cash flow of the company during this time will therefore be used to ensure that the company has sufficient cash resources to fund the payment of the catalogue bonuses as required.
»Additionally, the suspension of dividend payments will provide the company with the headroom required to maintain compliance with its revolving credit facility's fixed charge cover ratio covenant if the accrual adjustment is
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