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Hipgnosis results reflect success of proven songs and song management asset class

Hipgnosis Songs Fund: SONG

Hipgnosis Songs (SONG) announce final results for the year ended 31 March 2021, with the following operational and financial highlights:

Operational highlights

  • 84 Catalogues acquired for $1.089bn including Rock And Roll Hall of Fame inductees Neil Young, Lindsey Buckingham / Fleetwood Mac, Steve Winwood, Debbie Harry and Chris Stein / Blondie, and Chrissie Hynde / The Pretenders, Songwriters Hall of Fame inductees Carole Bayer Sager and Barry Manilow as well as the iconic Songs of Shakira, Rick James, Enrique Iglesias and B-52’s, taking the total Portfolio to approximately $2 billion invested across 138 Catalogues
  • High calibre recruitments at the investment adviser’s song management team, including Ted Cockle, Amy Thomson, Tom Stingemore, Patrick Joest and Joe Maggini, with synch growing to 15% of revenue from 9% in the prior year
  • Acquisition of Big Deal Music, now Hipgnosis Songs Group, providing in-house administration in the US leading to significant savings on third party administration fees
  • Continued to advocate for Songwriters to receive a greater share of a Song’s income at the highest level including the DCMS hearings taking place in UK Parliament.

Financial highlights

  • Operative NAV increased by 11.3% to $1.6829 per share over the year (31 March 2020: $1.5114)
  • Including dividends paid, this represents a total operative dollar NAV Return of 15.7% for the year, taking total NAV return since IPO to 40.7%
  • Like-for-like valuation uplift across the portfolio of 10.4% during the year
  • Catalogue revenues highly resilient through COVID-19 pandemic and well placed for future growth with acceleration of streaming adoption:
    • Streaming income increased by 18.4% in the second half of the year from the previous six month period
  • Annual dividend target increased by 5% to 5.25p per ordinary share
    • Total dividends of 5.125p paid in respect of the period, covered 1.58 times by leveraged free cash flow
    • The company intends to declare its first interim dividend for the year ending 31 March 2022 following completion of the current placing
  • Net debt of $464.6m as at 31 March 2021
  • Change of functional and presentation currency to reflect significant increase in the proportion of catalogues, revenue and transactions denominated in USD

‘Return since IPO evidence of the high uncorrelated nature of proven songs’

Merck Mercuriadis, founder of The Family (Music) and SONG, said: “Against one of the most challenging backdrops of our lives, the operative NAV per Share increased by 11.3% to $1.6829, which with dividends paid reflects a total operative dollar NAV return of 15.7%. This brings the Total NAV Return since IPO less than three years ago to 40.7%. This strong return evidences not only our ability to be able to buy and manage our culturally important and extraordinarily successful songs well but also the highly uncorrelated nature of proven songs.

Whilst we would never have wished for a pandemic, it has not only demonstrated the predictable, reliable and uncorrelated nature of the income of proven songs, but also accelerated the change in consumer behaviour to consuming music by streaming. revenues have been highly resistant during the course of this incredibly challenging year and are well placed for future growth with global streaming adoption beating all expectations – seeing the 30m paid subscribers when we first started grow to 450m paid subscribers today to what are forecast to be 2 billion paid subscribers by the end of the decade. This has turned music from being a discretionary or luxury purchase to very much being a utility as a result of the convenience and access afforded by streaming. Going forward this accelerated streaming will be enhanced as revenues from TikTok, Peloton, Triller, Roblox, and other rapidly emerging digital platforms start to be paid through. These are new income streams, expected to be a material portion of our revenue going forward, that are not in the data that we buy Catalogues on. We are entering an era where now, for the first time ever, almost all consumption of music is paid for.

Having now grown SONG to a $1.8bn market cap FTSE 250 company and invested almost $2bn in iconic songs that are a part of the fabric of our society, which have just been independently valued at $2.2bn, it is worth re-stating our ambitions when we listed three years ago, which were to:

1. Establish songs as an asset class;

2. Use the influence of our fund and the great songs in our catalogue to be a catalyst to change where the songwriter sits in the economic equation for the benefit of the songwriting community and our shareholders;

3. To replace the broken traditional publishing model with song management and add value by managing the songs with bandwidth and responsibility.

Having delivered another strong, and index beating, set of results, having advocated for songwriters at the highest level including the DCMS hearings taking place in UK Parliament and having increased our synch income through song management, as a percentage of total revenue, I’m delighted to say our ambitions are turning into reality and we are well on our way to Hipgnosis achieving them all.”

SONG: Hipgnosis results reflect success of proven songs and song management asset class

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