Hipgnosis Songs Fund didn’t purchase a single catalog within the 6 months to finish of March. It nonetheless grew in worth by $140m.

Hipgnosis Songs Fund has at the moment (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 Trade in 2018;
• Its funding advisor is Hipgnosis Music Administration (HSM), which is run by Merck Mercuriadis and his group;
• 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) just 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 on.

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 significant catalyst in Wall Road’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 (masking the six months to finish of September 2021), revealed final yr, Hipgnosis confirmed it owned 146 Catalogues throughout 65,413 songs.

And at the moment, in its full-year fiscal report (masking 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 Crimson Scorching Chili Peppers, The Monsters & Strangerz, Christine McVie and extra).

After that increase, nevertheless, the corporate pledged it wouldn’t increase any extra capital on the general public markets till not less than 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 non-public 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 side 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 unbiased 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 unbiased 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 world restrictions have eased and market progress has returned, now we have now additionally proven that our acquisition technique and disruptive Music Administration method leaves us well-positioned to outperform.

“Our technique to amass solely essentially the most profitable and culturally vital Songs, together with 67 of the 271 Songs which have been performed over 1 billion occasions on Spotify, has delivered like-for-like Streaming progress of 19% within the second half of our fiscal yr alone.”

“Within the second half of our fiscal yr 2021/2022, as most world restrictions have eased and market progress has returned, now we have now additionally proven that our acquisition technique and disruptive Music Administration method leaves us well-positioned to outperform.”

Mercuriadis provides that this streaming progress “outperformed our Unbiased Valuer’s expectations, and along with the primary time recognition of the worth of income generated from the now established digital life-style platforms which have emerged, led to an annual enhance in our Operative NAV of 9.9%”.

One key issue within the progress of Hipgnosis Songs Fund’s worth: The agency’s annual report says that it noticed a “20% enhance of formal synch licences authorised 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 because of the 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 value 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 beneath).

Added Mercuriadis: “During the last 4 years now we have acquired an incomparable portfolio of a few of the most profitable and culturally vital Songs of all time, now valued at $2.7 billion. The distinctive power 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 Complete NAV Return of 14.2%. That is largely pushed by our iconic Songs outstripping the overall market progress in Streaming, notably within the second half of 2021, offering validation for our funding technique.

“As we glance ahead, we proceed to anticipate sturdy world income progress pushed by the continued adoption of paid-for Streaming. Regardless of the macro-economic surroundings, 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, gives essentially the most complete providing of the on-demand, leisure subscription companies.

“This view is shared by the main voices within the sector, together with Goldman Sachs, who not too long ago upgraded their double-digit annual progress forecast by way of to 2030 of their gold normal Music In The Air: Music nonetheless sounds good in a macro downturn; elevating world trade forecasts report.”

Continued Mercuriadis: “With clear proof of a powerful restoration in world Efficiency earnings, 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 progress in Streaming, I consider we’re wanting ahead to very engaging market circumstances.

“Given our incomparable assortment of iconic Songs, I consider Hipgnosis is completely positioned and can proceed to ship wonderful returns for our Shareholders.

“Thanks to our Shareholders to 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’ll be able to see the whole lot of catalog acquired by the corporate so far.

Music Enterprise Worldwide