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Hipgnosis Songs Fund achieves 6.1% gross yield

Hipgnosis Songs Fund: SONG

Hipgnosis Songs Fund (SONG) has announced its maiden final results in which it says it has achieved a 6.1% gross yield. Specifically, the results cover the period from 8 June 2018 (SONG’s date of Incorporation) to 31 March 2019. SONG says that, “recognised net revenues from the Portfolio from incorporation on 8 June 2018 to the financial period end on 31 March 2019 were £7.2 million, equivalent to 6.1 percent gross yield on the invested component of our Portfolio as at 31 March 2019, which is in line with our projections at launch”.

Dividend targets met

SONG highlights that it has met its objective at launch of declaring dividends of 3.5p per Ordinary Share (in aggregate) in relation to the first 12 months following Admission. During the period the Company has paid dividends of 2.25p per Ordinary Share to date, with a first interim dividend for the current financial period of 1.25p approved by the Board on 21 June 2019 and payable in August 2019. SONG’s future target dividend yield is 5 percent per annum (based on the IPO issue price of 100p) on the Ordinary Shares and SONG says that it expects to grow its dividend yield over time.

Operational highlights

The company has provided the following key operational highlights in its results announcement:

  • As at 31 March 2019 the Company had invested approximately £120 million through the acquisition of 12 Catalogues on a blended acquisition multiple of 12.75x historical annual net income, resulting in interests in 3,096 Songs
  • As at 21 June the Company has acquired, or entered into exclusivity agreements to acquire, catalogues with a total value of £387 million, which represents an aggregate multiple of 12.56x historic annual net income
  • Dividend target of 3.5p per share for the first 12 months following admission was achieved – a dividend yield of 3.5% based on the IPO issue price of 100p
  • the Company continues to target a total dividend of 5.0p per annum1 from the current financial year
  • Funding resources were significantly increased following the period end, with a further £141.5 million raised on 12 April 2019 through a secondary placing due to significant demand from existing institutional investors
  • At the end of the period, the Portfolio contained 664 Songs that have held Number 1 and/or Number 2 positions in global charts, as well as 704 Songs that have held Top 10 chart positions and 10 Grammy award winning Songs
  • Further Catalogue acquisitions post period end include an additional 247 Number 1 singles and 801 Top 10 chart positions globally
  • The Portfolio was independently valued at £128.7 million as at 31 March 2019, reflecting an increase in the fair value of the Portfolio of £8.7 million
  • Notable synchronisation licenses were secured for a wide range of Songs within the Portfolio

Financial highlights

The company has provided the following key financial highlights in its results announcement:

  • Recognised gross revenues from the Portfolio for the period were £7.2 million
  • Operative net assets as at 31 March 2019 was £208.8 million, representing an operative net asset value (“NAV”) per share of 103.27p, up 4.6% on 30 September 2018
  • IFRS net assets as at 31 March 2019 was £198.6 million, representing an IFRS NAV of 98.21p per share, up 0.5% on 30 September 2018
  • 64% of the Portfolio’s revenue was generated in the USA and 15% in the UK, with an increase in revenue from other developed and emerging market countries expected as streaming services expand in those markets
  • Dividends of 2.25p per share were paid during the period

Post-period Review and Outlook

  • The first interim dividend for the current financial year of 1.25p per share was approved by the Board on 12 June 2019 and is payable on 30 August 2019
  • Full commitment of the remaining capital expected by the end of July 2019
  • Conditions for Catalogue acquisition in the music industry remain favourable
  • In 2018 the overall global recorded music market grew by 9.7% in value, marking the fourth consecutive year of global growth and the highest rate of growth since IFPI started tracking the market in 1997
  • The Investment Adviser has identified a pipeline of attractive investment opportunities with an aggregate value in excess of £1 billion

Portfolio Highlights

The company has provided the following key portfolio highlights in its results announcement:

  • The Songs in the Portfolio continue to experience commercial success and receive critical acclaim, including:
  • Sam Hollander’s Songs have been streamed over four billion times and recently ‘High Hopes’ became the all-time longest-running Number 1 Song on Billboard’s Hot Rock Songs chart having just completed its 32nd week at Number 1;
  • ‘These Days’, by Rudimental featuring Jess Glynne, which was co-written by Jamie Scott, recently won the ‘PRS for Music Most Performed Work’ at the 2019 Ivor Novello awards;
  • Shakespears Sister announced their reformation by performing their Number 1 single ‘Stay’, from the recently acquired David A. Stewart Catalogue, live on the Graham Norton Show. They will be performing a World Tour this autumn which will generate significant performance royalties for the Song;
  • Celine Dion gave a World Premiere of her forthcoming new single ‘Lying Down’, which was co-written by Giorgio Tuinfort and is a newly released Song within our Catalogue, on Carpool Karaoke with James Corden which was broadcast on CBS primetime on 20 May. This video has already been viewed 15 million times on YouTube;
  • Camila Cabello and Young Thug’s ‘Havana’, co-written by Starrah, is nine times Platinum in the U.S. and has been named the IFPI’s biggest selling Song of 2018 on a global basis;
  • ‘Would You Ever’ by Skrillex & Poo Bear was certified as a gold selling single on 21 February 2019;
  • Michael Knox has the number 1 country single of the year to date with ‘Girl Like You’ by Jason Aldean who has been named the Academy of Country Music’s ‘Artist of the Decade’;
  • ‘Girls Like You’ by Maroon 5 featuring Cardi B co-written by Starrah spent 33 weeks in the Hot 100’s top 10, tying Ed Sheeran’s ‘Shape of You’ for the longest reign on the Billboard ‘Adult Contemporary Chart’;
  • ‘Homecoming’ is a 2019 American concert film about Beyoncé and her performance at the 2018 Coachella Valley Music and Arts Festival, written, directed and executive produced by Beyoncé herself. The album and the film contain 11 Songs from our Portfolio which are co-written by The-Dream, Tricky Stewart and Sean Garrett, with writing credits on ‘Single Ladies (Put a Ring On It)’, ‘Love On Top’, ‘Flawless/Feeling Myself’, ‘Diva’ and many others;
  • Notable synchronisation deals were delivered across our Portfolio, particularly from the Bernard Edwards Catalogue as highlighted above and The-Dream Catalogue including The Beyoncé Song ‘XO’ which was licensed to Louis Vuitton, ‘Hard’ by Rhianna and the J. Holiday Song ‘Bed’ which were both licensed to Universal Pictures;
  • The Bernard Edwards Catalogue is our most synchronised Catalogue and is on track to earn synchronisation revenues of more than $1 million this year;
  • The Eurythmics ‘Sweet Dreams (Are Made Of This)’ which was co-written, co-performed and produced by David A. Stewart, and on which we receive song, artist and producer royalties, was recently named as the most streamed Song of 1983 by the British Phonographic Institute (BPI); and
  • Nile Rodgers & CHIC have completed more than 35 shows in the U.S. with Cher this year performing more than 12 Songs from our Bernard Edwards Catalogue generating significant songwriter’s share of performance royalties. They are now set to perform 20 headline and festival shows in the UK and Europe this summer.

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