12 days after shareholders voted against its continuation – and nearly three weeks after launching a strategic review – Hipgnosis Songs Fund (HSF) has appointed a new chairman and “determined that it will not declare dividends before the new financial year.”
The publicly traded songs fund’s board made the announcements via separate releases, on the heels of several less-than-desirable developments during October. Besides seeing investors vote against its continuation, Hipgnosis last month grappled with a record-low stock price and the rejection of a proposed $440 million catalogs sale.
Additionally, owing to a different stakeholder vote, late October ushered in the immediate departure of HSF chairman and director Andrew Sutch, who had in any event been preparing to step down.
And on this front, HSF has tapped Intuitive Investments Group CEO Robert Naylor as board chairman. Naylor previously served in the same capacity for Round Hill’s recently sold songs fund, and according to its website, Intuitive “offers investment into life science companies.”
Plus, Orfium exec Francis Keeling, himself a former Round Hill director, has also joined the board of Hipgnosis Songs Fund, the company disclosed.
Shifting to the dividend announcement, HSF chalked up the decision to the mentioned review of (among other things) its “financial position,” including performance-based bonus payments owed for certain catalogs.
(HSF’s fiscal year runs through March’s end – meaning that any new dividends won’t arrive before April at the very earliest. Moreover, the HSF board is scheduled to “update” the dividend policy in “proposals which are due to be made to shareholders by” the 26th of April.)
As described by HSF, which is said to be conducting the review with its Hipgnosis Song Management “investment adviser,” payable catalog bonuses increased to $68 million on September 30th. The involved cash is expected to reach the original sellers of 10 HSF catalogs (of 146 total) that are “likely to meet performance hurdles as defined in their acquisition agreements.”
$40 million will be due within 12 months of the date, whereas another $24 million will be due within one to two years, per HSF. The remaining $4 million, the company said, will be due within two to three years.
Hipgnosis Songs Fund further acknowledged 19 additional catalogs with a cumulative $75 million in active bonus provisions, but claimed that they “are unlikely to meet performance hurdles.”
Also factoring into the dividend decision is an ongoing exploration of “refinements to the methodology adopted in the Company’s revenue accrual estimation process for the year end results which, based on early assessments, may result in an accrual adjustment reducing revenue accruals by up to 10%,” per the text.
Upon nixing a planned dividend in mid-October – a move that was quickly followed by the aforesaid record-low HSF stock price – the songs fund pointed to a miscalculation of retroactive Phonorecords III payments.
“Any changes would aim to bring consistency to the description of IFRS revenue and the Pro Forma Annual Revenue measure through the use of granular data in the underlying calculations, to support an improved estimation process and enhanced disclosures,” HSF indicated.
When the market closed today, Hipgnosis Songs Fund stock (LON: SONG) was worth about 71 pence (currently 87 cents) per share, reflecting an approximately one percent decrease from opening.