HIPGNOSIS DELIVERS "VALIDATING" ANNUAL REPORT
In delivering his fiscal-year results for the year ended 3/31, coinciding the fifth anniversary of its IPO, Merck Mercuriadis and his Hipgnosis team talked about the rise in the value of the company's assets, the growth in revenue based on royalty statements and how this year's results are "an important validation" of the company's strategy.
Financially, operative NAV (net asset value) rose 3.6% YOY to $1.9153 per share. Total NAV return, including dividends paid, has been 69% since the 2018 IPO. Meanwhile, the company saw its revenue earned by catalogs based on royalty statements grow 12.1% YOY. Excluding isolated reductions in IFRS revenue, net revenue grew 10.9% YOY. The report goes deeper into these numbers, but naturally that proved to be beyond our capacity to comprehend.
Other highlights in the report include high-profile syncs, such as Rihanna performing four Hipgnosis songs at the Super Bowl Halftime Show and Journey's "Separate Ways" in Stranger Things; administration partnerships with Sacem and peermusic reducing third-party admin and collection costs by 6.6% on the 6,200 songs reverted to date; successful trials of multi-territory live-performance direct-revenue-collection services; and the U.S. Copyright Royalty Board confirming increases for mechanical streaming rates for the 2023-27 period.
Merck's delight and optimism are on full display in his comments accompanying the results.
“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 catalogs are behaving exactly how you would expect with 11.4% PFAR [Pro Forma Annual Review] growth, whilst our younger catalogs, now reaching the end of their natural decay curves, grew even more quickly, enabling us to take full advantage of growth in the market."
Merck went on: “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. 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.
“Five years ago, we predicted that the recovery of the music industry from the previous 16 years of technological disruption would be driven by the convenience and meteoric growth of streaming. In addition, we considered that we could deliver an exceptional return to shareholders by acquiring iconic songs while they were still attractively priced. Against this backdrop, we curated a portfolio of songs that is unrivalled for its extraordinary success and cultural importance. Each of these catalogs is iconic and, significantly, was selected specifically to benefit from the growth in music streaming."
