14 July 2022
Hipgnosis Songs Fund Limited (“Hipgnosis” or the “Company”)
Final Results for the year ended 31 March 2022
The Board of Hipgnosis Songs Fund Limited, the first UK listed investment company offering investors a pure-play exposure to songs and associated intellectual property rights, and its Investment Adviser, Hipgnosis Song Management Limited, are pleased to announce the Company's final results for the year ended 31 March 2022.
Financial Highlights
- Operative NAV increased by 9.9% to $1.8491 per Share (31 March 2021: $1.6829)
o As at 31 March 2022, the Operative NAV presented in Sterling would be 140.79p per Share (GBP:USD 1.3134)
o As at 13 July 2022, the Operative NAV presented in Sterling would be 154.76p per Share (GBP:USD 1.1949)
- Including dividends paid, Total Operative Dollar NAV Return of 14.2% for the year, taking Total NAV Return since IPO to 59.1%
- NAV growth driven by a 9.5% like-for-like value uplift across the Portfolio to $2.7 billion, as determined by Portfolio Independent Valuer, as a result of:
o Strong like for like Streaming growth of 19.4% in the second half of 2021, compared to the first half of 2021, in excess of the Valuer's expectations, resulting in an increase in expected future Streaming revenues
o Increase in expected revenues due from emerging technology platforms as material revenues start to be paid into publishers and record companies
- Gross Revenue increased by 24.7% to $200.4 million (31 March 2021: $160.7 million) partly due to the Catalogue acquisitions during the period
- Pro-Forma Annual Revenue (PFAR), which shows royalty earnings during a 12-month period, irrespective of ownership, grew strongly in H2 2021. Whilst for the full calendar year 2021, PFAR fell 5.3% to $114.9 million (2020: $121.26 million) largely due to the impact of COVID-19 restrictions, there was an 11.6% pro forma revenue increase in H2, compared to H1, driven by Streaming revenue growth and the re-opening of performance venues
- EBITDA increased by 21.8% to $129.9 million (31 March 2021: $106.7 million)
- Total dividends of 5.25p per ordinary share paid were fully covered (1.01x) by leveraged free cash flow
- Net debt of $569.9 million as at 31 March 2022, reflecting 25.4% of Operative NAV
Operational Highlights
- Portfolio now comprises of 146 Catalogues, 65,413 songs, with an aggregate value of $2.69 billion, and includes some of the most successful and culturally important songs of all time
- Acquired 8 Catalogues, including Red Hot Chili Peppers, Christine McVie of Fleetwood Mac, Ann Wilson of Heart, Rhett Akins, and Stefan and Jordan Johnson – The Monsters & Strangerz, using the proceeds of an oversubscribed placing which raised over £156 million ($215 million) in July 2021
- Significant investment in Investment Adviser's capabilities, particularly in Song Management, finance, investment teams and data analytic functions
- A 20% increase of formal synch licences approved in the 6 months to 31 March 2022 vs the first half of the financial year
- Post period end, in July 2022, signed a ground-breaking direct administration agreement with Sacem, the French CMO, materially reducing third party administration and collection fees, middlemen and the length of time it takes to collect digital revenues
- Our advocacy for fairness for songwriters has helped to secure Competition and Markets Authority market study into Music and Streaming
Commenting on the results, Merck Mercuriadis, CEO and Founder of Hipgnosis Song Management and Founder of Hipgnosis Songs Fund said:
“Over the last four years we have acquired an incomparable portfolio of some of the most successful and culturally important Songs of all time, now valued at $2.7 billion. The unique strength of our Catalogue is demonstrated by the 9.9% increase in the Operative NAV to $1.8491 per share, as reported by our Independent Portfolio Valuer, and a Total NAV Return of 14.2%. This is largely driven by our iconic Songs outstripping the general market growth in Streaming, particularly in the second half of 2021, providing validation for our investment strategy.
“As we look forward, we continue to expect strong global revenue growth driven by the continued adoption of paid-for Streaming. Despite the macro-economic environment, the attractiveness of the music Streaming proposition continues to grow. It is the lowest cost entertainment subscription service and, with its offering of a near complete repertoire of global music, provides the most comprehensive offering of the on-demand, entertainment subscription services. This view is shared by the leading voices in the sector, including Goldman Sachs, who recently upgraded their double-digit annual growth forecast through to 2030 in their gold standard Music In The Air: Music still sounds good in a macro downturn; raising global industry forecasts report.
“With clear evidence of a strong recovery in global Performance income, the recent CRB III determination to increase Streaming royalty rates for songwriters, and potential for further improvements in the upcoming CRB IV determination, all in addition to the extremely strong growth in Streaming, I believe we are looking forward to very attractive market conditions. Given our incomparable collection of iconic Songs, I believe Hipgnosis is perfectly placed and will continue to deliver excellent returns for our Shareholders.
“Thank you to our Shareholders for your incredible support, our Board, brokers and the incredible songwriters who have entrusted us with their incomparable Songs.”
Analyst Presentation
The Investment Adviser will be hosting a webinar for analysts at 12:00pm BST today. To register to participate, please contact rufina@hipgnosissongs.com.