Hipgnosis Songs Fund has as we speak (July 14) revealed its full-year monetary outcomes for the 12 months to finish of March.
Earlier than we dig into that, and our headline above, the now-standard little bit of housekeeping:
- Hipgnosis Songs Fund (HSF) is the publicly-traded UK fund that IPO’d on the London Inventory Alternate in 2018;
- Its funding advisor is Hipgnosis Music Administration (HSM), which is run by Merck Mercuriadis and his workforce;
- Blackstone final yr privately invested a billion US {dollars} in a brand new Hipgnosis fund, Hipgnosis Songs Capital (HSC), along with making an undisclosed funding in Hipgnosis Music Administration;
- The latter firm (HSM) isn’t solely tasked with discovering catalog acquisition alternatives for each HSF and HSC, but in addition with maximizing returns from their owned catalogs vis sync, advertising, streaming and so forth.
What was notably fascinating about Hipgnosis Songs Fund (the UK-listed entity) within the second half of its newest fiscal yr? It didn’t spend a single penny on catalogs.
Having revolutionized the catalog-acquisition market since 2018 – and been a serious catalyst in Wall Avenue’s understanding of music as an “asset class” – HSF stood nonetheless (acquisition-wise) within the six months to finish of March 2022.
How do we all know? As a result of in its half-year fiscal report (protecting the six months to finish of September 2021), revealed final yr, Hipgnosis confirmed it owned 146 Catalogues throughout 65,413 songs.
And as we speak, in its full-year fiscal report (protecting the 12 months to finish of March 2022), Hipgnosis confirms that it owns… 146 Catalogues throughout 65,413 songs.
None of this can be a shock: As MBW defined to you final yr, Hipgnosis Songs Fund raised $215 million through the general public markets in July 2021 (which it then spent on catalogs from artists/writers just like the Pink Sizzling Chili Peppers, The Monsters & Strangerz, Christine McVie and extra).
After that elevate, nonetheless, the corporate pledged it wouldn’t elevate any extra capital on the general public markets till at the least Q2 2022 (a interval we now discover ourselves in).
In the meantime, debt-wise, HSF seems totally leveraged below the present fiscal guidelines governing the working of its enterprise.
(In contrast, Hipgnosis Songs Capital, the Blackstone-backed personal fund, has been busy shopping for catalogs by the likes of Leonard Cohen and Justin Timberlake for nine-figure sums in current months.)
So right here’s the factor: For as soon as, for now, the fascinating facet about Hipgnosis Songs Fund (within the six months to finish of March) isn’t what it purchased; it’s how a lot it grew in worth.
In line with an impartial valuer quoted in HSF’s monetary filings (and as reported by MBW final yr), Hipgnosis Songs Fund’s portfolio of copyrights was price USD $2.55 billion on the finish of September 2021.
Six months later (as per HSF’s new annual report) and that very same impartial valuer now says that – as of finish of March 2022 – Hipgnosis Songs Fund’s portfolio was price $2.69 billion.
In different phrases, over the course of six months, Hipgnosis purchased nothing in any respect… and nonetheless grew in worth by $140 million.
Explains Hipgnosis Songs Fund founder, Merck Mercuriadis, in HSF’s new annual report: “Within the second half of our fiscal yr 2021/2022, as most international restrictions have eased and market development has returned, we’ve now additionally proven that our acquisition technique and disruptive Music Administration strategy leaves us well-positioned to outperform.
“Our technique to amass solely probably the most profitable and culturally necessary Songs, together with 67 of the 271 Songs which were performed over 1 billion instances on Spotify, has delivered like-for-like Streaming development of 19% within the second half of our fiscal yr alone.”
“Within the second half of our fiscal yr 2021/2022, as most international restrictions have eased and market development has returned, we’ve now additionally proven that our acquisition technique and disruptive Music Administration strategy leaves us well-positioned to outperform.”
Mercuriadis provides that this streaming development “outperformed our Unbiased Valuer’s expectations, and along with the primary time recognition of the worth of income generated from the now established digital way of life platforms which have emerged, led to an annual enhance in our Operative NAV of 9.9%”.
One key issue within the development of Hipgnosis Songs Fund’s worth: The agency’s annual report says that it noticed a “20% enhance of formal synch licences permitted within the 6 months to [March 31, 2022] versus the primary half of the monetary yr”.
A bunch of different monetary data is revealed in Hipgnosis Songs Fund’s new annual report, too.
Throughout the complete yr (to finish of March 2022), HSF’s gross income elevated by 24.7% to USD $200.4 million (31 March 2021: $160.7 million) partly as a result of catalogue acquisitions the agency executed within the first half of its fiscal yr.
Web income of $168.3 million elevated by 21.7% year-on-year (31 March 2021: $138.3 million), following royalty price deductions of $32.0 million (31 March 2021: $22.5 million).
And EBITDA elevated by 21.8% to $129.9 million (31 March 2021: $106.7 million).
HSF posted an working lack of $16.7m within the yr (see under).
Added Mercuriadis: “During the last 4 years we’ve acquired an incomparable portfolio of among the most profitable and culturally necessary Songs of all time, now valued at $2.7 billion. The distinctive energy of our Catalogue is demonstrated by the 9.9% enhance within the Operative NAV to $1.8491 per share, as reported by our Unbiased Portfolio Valuer, and a Whole NAV Return of 14.2%. That is largely pushed by our iconic Songs outstripping the final market development in Streaming, notably within the second half of 2021, offering validation for our funding technique.
“As we glance ahead, we proceed to count on sturdy international income development pushed by the continued adoption of paid-for Streaming. Regardless of the macro-economic atmosphere, the attractiveness of the music Streaming proposition continues to develop.
“It’s the lowest-cost leisure subscription service and, with its providing of a close to full repertoire of world music, supplies probably the most complete providing of the on-demand, leisure subscription providers.
“This view is shared by the main voices within the sector, together with Goldman Sachs, who lately upgraded their double-digit annual development forecast by means of to 2030 of their gold commonplace Music In The Air: Music nonetheless sounds good in a macro downturn; elevating international business forecasts report.”
Continued Mercuriadis: “With clear proof of a robust restoration in international Efficiency revenue, the current CRB III willpower to extend Streaming royalty charges for songwriters, and potential for additional enhancements within the upcoming CRB IV willpower, all along with the extraordinarily sturdy development in Streaming, I imagine we’re wanting ahead to very enticing market circumstances.
“Given our incomparable assortment of iconic Songs, I imagine Hipgnosis is completely positioned and can proceed to ship glorious returns for our Shareholders.
“Thanks to our Shareholders in your unimaginable assist, our Board, brokers and the unimaginable songwriters who’ve entrusted us with their incomparable Songs.”
Beneath, taken from the Hipgnosis Songs Funds annual report – which you learn in full right here – you may see everything of catalog acquired by the corporate thus far.
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