The board of Hipgnosis Songs Fund and investment adviser The Family (Music) has issued a trading update ahead of the company’s results for the year ending March 31, 2020.
Describing a “transformational first year”, the company outlined the activity including the acquisition of 42 catalogues for £560 million. Hipgnosis now has a total portfolio of 54 catalogues.
The company also raised £422.9m of new equity, which has been fully deployed.
Hipgnosis said that feelgood hits such as Sweet Dreams (Are Made Of This) and Livin’ On A Prayer by Bon Jovi have performed particularly strongly during the Covid-19 pandemic.
“At this difficult time, people have looked to music for a sense of positivity and normality,” said the company. “This is being seen most evidently with streaming where there has been a surge in listening to vintage songs.
“There will be reductions in public performance and live income as the lockdown impacts the leisure and live entertainment industry,” said Hipgnois. “Whilst it is too early to quantify this impact, the company’s portfolio of vintage catalogues have a low weighting to these sectors with live income representing approximately 3% and public performance 13% of catalogue revenues.”
Despite cuts in advertising and pausing of film releases, Hipgnosis said it has not seen a decrease in demand for song placements and sync. The board expects income growth from streaming to exceed any lost earnings from public performance and live.
Hipgnosis was transferred from the Specialist Fund segment to the Premium segment of the main market of the London Stock Exchange. It secured inclusion in the FTSE 250 index.
The company reported a net asset value (NAV) return of 17.7%. Operative NAV has increased by 13% to 116.7p per share since March 31, 2019.
The valuation of the portfolio has increased by 11.4% (8.6% at constant currency) since acquisition. It has been independently valued at £757m, compared to the aggregate purchase price of £679m.
Catalogues acquired include those of Journey, Richie Sambora, Timbaland, Brendan O’ Brien, Tom Delonge (Blink 182), Brian Higgins, 10cc, Fraser T Smith, Al Jackson Jr and Mark Ronson.
Merck Mercuriadis, founder of Hipgnosis Songs Fund and The Family (Music), said: “We are very excited about these results and we are particularly proud that everything we have promised our investors over the last two years has either come to fruition or been exceeded. We have bought amongst the finest songs of all time against a backdrop of dramatic streaming growth and we are adding significant value by actively managing these great songs and bringing efficiencies to collection.
“A core part of our thesis is that song revenues are uncorrelated as, whether in good times or challenged, music is always being consumed. While we would not have wished for a pandemic to demonstrate this it has indeed done exactly that and that has been reflected in our strong performance. We have become a FTSE 250 company in only 20 months, which I’m told is the fastest of any company ever on the index, and we are now the number 23 biggest yielder on the FTSE 250 meaning there are only 22 companies paying a bigger dividend than we are at a time when many have had to cancel their dividends altogether.
“I would sincerely like to thank all of our investors for their belief in helping us to establish proven songs as arguably the strongest of new asset classes which is not only great news for all of us but the wider community of songwriters, artists and producers as a whole.”
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