Hipgnosis Songs Fund Ltd floated on the London Stock Exchange little under a year ago – and it’s been one of the biggest talking points of the global music industry ever since.
The company raised £200m ($265m) for that initial IPO, and has since spent the lot on publishing and songwriter catalog acquisitions. Indeed, it raised another £142m ($185m) for further acquisitions two months ago.
Today, we have received an important update on exactly how this money is being spent – and how Hipgnosis is performing as a result – within the firm’s first ever annual results.
It reveals that Hipgnosis, which was founded by veteran artist manager Merck Mercuriadis (pictured with client Nile Rodgers) acquired 12 catalogs in the period between June 8, 2018 and end of March 2019 for a total of approximately £120m ($153m): The-Dream, Poo Bear, TMS, Tricky Stewart, Giorgio Tuinfort, Bernard Edwards, Itaal Shur, Rico Love, Sean Garrett, Johnta Austin, Ari Levine and Sam Hollander.
This run of acquisitions comprised 3,096 songs, while that £120m cumulative pricetag “represented a blended acquisition multiple of 12.75x historical three year average net income”.
In positive news for Mercuriadis and his investors, the value of this catalog has already grown significantly. Says the report, “The fair value of the portfolio as at 31 March 2019 was £128m, reflecting an increase in the fair value of the Portfolio as determined by the Independent Valuer of £8.7m.”
In total – including that (June ’18 – March ’19) financial period plus the subsequent three months – Hipgnosis says that it has acquired no less than 5,891 songs (see below). Over 1,000 of these came with the buyout of the Dave Stewart catalog, announced last month.
The report reveals: “[Since] IPO, the company has acquired, or entered into exclusivity agreements to acquire, catalogs with a total value of £387m, which represents an aggregate multiple of 12.56x annual net income.”
Hipgnosis says that it expects to have spent its remaining capital, excluding any leverage, by the end of July 2019, which would take its total spending comfortably above £340m (approx $433m) over the course of its first 13 months of trading.
You can expect another raise soon, then – and a big one. As the report points out: “We now have a pipeline of catalogs with an aggregate value in excess of £1 billion.” (For US readers, the current-day equivalent of over $1.3bn.)
In terms of total revenues in the financial year period (June ’18-March ’19), Hipgnosis turned over net revenues of £7.2m.
It says that publishing income in this period increased by 9% when compared to the portfolio’s performance in the year prior to acquisition (based on data obtained during the respective catalog due diligence processes), driven mainly by an increase in synchronisation and streaming income.
As an example, Hipgnosis notes that the Bernard Edwards catalog achieved over $512,000 in gross sync placements in April 2019. “In relation to The-Dream’s catalog we have taken a single Song from $7,000 in total earnings in 2018 to $125,000, from synchronisation alone, in calendar year 2019 to date,” it adds.
The firm’s net revenues include an accrual of £1.9m for performance income, to account for the songwriter’s share of performance royalties which are subject to a significant time lag in reporting in the industry, but which the company is entitled to receive in due course.
Operative net assets as at 31 March 2019 was £208.8m, representing an operative net asset value (“NAV”) per share of 103.27p, up 4.6% on 30 September 2018
Some 64% of the portfolio’s revenue in the fiscal year was generated in the USA. Another 15% came from the UK, with an increase in revenue from other developed and emerging market countries now expected.
You can download the full Hipgnosis Songs Fund Ltd annual financial report through here.Music Business Worldwide