Hipgnosis Songs Fund, and its investment adviser Hipgnosis Song Management, have announced their financial results for the year ended March 31, 2023.
Net revenue of $147.2 million was down 12.5% year-on-year. However, excluding one-off adjustments, net revenue grew by 10.9% year-on- year.
Hipgnosis also published results from calendar year 2022. Pro-forma Annual Revenue (PFAR), which shows the royalty revenue earned by catalogues, grew 12.1% year-on-year to $130.2m.
There was continued growth in streaming income, which increased by 14.8% year-on-year in 2022 to $52.1m.
Synchronisation income was up 24.7% to $19.4m. High profile syncs include Blink-182’s All the Small Things as the soundtrack to the John Lewis Christmas Advert; Rihanna performing four Hipgnosis Songs in the Super Bowl half-time show; Journey’s Separate Ways (Worlds Apart) in Stranger Things; Nile Rodgers and Bernard Edwards’ Spacer in the new Renault Space commercial; and a Hipgnosis-created cover of Bon Jovi’s Wanted Dead or Alive on the global trailer for the new Transformers: Reactivate video game.
Nicki Minaj’s Super Freaky Girl, which interpolates Rick James’s hit Super Freak, went to No.1 in the US as well as being a Top 5 hit in the UK.
There was a 9% increase in performance revenues to $30.8m. A small half-year decline was more than offset by a 41% increase in the second half of 2022, which suggests that revenue from the post-Covid-19 lockdown recovery is now being paid through.
Classic songs performed well with income from catalogues over 10 years old up 11.4% year-on-year. Income from younger catalogues (under 10 years old) was up 13% year-on-year, which Hipgnosis suggested provided further evidence that “younger catalogues are reaching the end of their natural decay curve”.
During the trading period, the US Copyright Royalty Board (CRB) confirmed substantial CRB III increases for mechanical streaming rates and accepted industry proposals (supported by Hipgnosis) for additional increases for 2023-2027 period.
I am aligned with shareholders in believing that the fundamental value of the company fails to be reflected in the current share price
Merck Mercuriadis, CEO and founder of Hipgnosis Song Management and founder of Hipgnosis Songs Fund, said: “Today’s results are an important validation of Hipgnosis Songs Fund’s investment thesis delivering the best like-for-like income growth in our short five-year history. Streaming revenues have grown strongly; the success of active song management is clearly visible in our sync successes; performance revenues were very strong with 41% second half growth demonstrating their return following Covid lockdowns; and, our over 10-year-old classic iconic catalogues are behaving exactly how you would expect with 11.4% PFAR growth, whilst our younger catalogues, now reaching the end of their natural decay curves, grew even more quickly, enabling us to take full advantage of growth in the market.”
Operative NAV per share increased 3.6% year-on-year at the end of the 2022-23 financial period, driven primarily by a 4% increase in the ‘fair value’ of the portfolio. However, the share price has fallen significant below that value ascribed to the song catalogues.
The Financial Times reported this week that some investors want Hipgnosis to sell catalogues to fund a share buyback programme, in order to boost the share price.
“Despite our strong numbers, I am aligned with shareholders in believing that the fundamental value and opportunity of the company fails to be reflected in the current share price,” said Mercuriadis. “As a result, we have been working with the board, following consultation with many of our largest shareholders, on a number of options to enhance shareholder value. We look forward to updating the market prior to the AGM and the continuation vote.”
Mercuriadis noted the growth forecast in the latest Goldman Sachs Music In The Air report.
“Hipgnosis Songs Fund, with its portfolio of iconic, culturally significant songs, is uniquely placed to benefit from this backdrop and deliver superior shareholder returns and substantial net asset value growth,” he said, “Both the board and I are determined to deliver this.”