Latitude Group Boosts Capital Notes Payout by 43%, Revises Tax Treatment

Distribution Revision and Tax Implications

Latitude Group Holdings Limited (ASX: LFS) has updated its distribution payment for its Capital Notes (LFSPA), increasing the amount from AUD 1.6136 to AUD 2.3052 per note. This adjustment reflects a significant change in the tax treatment of the distribution, with the franked component revised down to 0% from the previously announced 100%. Consequently, conduit foreign income is now applied to the distribution, marking a departure from prior payments.

The distribution relates to the quarter ending 27 January 2025, with a record date of 20 January 2025 and payment scheduled for 28 January 2025. The update was announced on 15 January 2025, amending the previous announcement dated 29 October 2024.

Understanding the Distribution Components

The Capital Notes distribution is classified as an ordinary dividend but is now fully unfranked, meaning investors will not receive the benefit of franking credits. Instead, the entire distribution amount of AUD 2.3052 per note is treated as conduit foreign income, which may have different tax implications for investors depending on their tax residency and circumstances.

The distribution rate for the period is calculated based on the 3-month Bank Bill Rate plus a margin of 4.75%, resulting in an annualised distribution rate of approximately 9.15%. This reflects the structure outlined in the Latitude Capital Notes Prospectus dated 10 September 2021.

Investor Considerations and Company Discretion

Latitude has emphasized that the distribution payment remains subject to its absolute discretion, underscoring the conditional nature of these payments. Investors should note that while the distribution amount has increased, the change in tax treatment could affect the after-tax return depending on individual tax profiles.

There is no requirement for security holder or regulatory approvals for this distribution, and no securities plan is in place for dividends or distributions on these Capital Notes. The currency of payment remains Australian dollars.

Broader Market and Strategic Implications

This adjustment in distribution and tax treatment may signal Latitude’s evolving capital management strategy amid changing market or regulatory conditions. The shift from a franked to an unfranked distribution with conduit foreign income could reflect underlying changes in the company’s earnings composition or tax planning approach.

For investors, this update invites a reassessment of the Capital Notes’ yield attractiveness and tax efficiency. Analysts will be watching closely for any further commentary or changes in Latitude’s capital structure or distribution policies in upcoming announcements.