TIDMSONG
RNS Number : 8661F
Hipgnosis Songs Fund Limited
13 July 2023
LEI: 213800XJIPNDVKXMOC11
Hipgnosis Songs Fund Limited ("Hipgnosis" or the "Company")
Final Results for the year ended 31 March 2023
13 July 2023
The Board of Hipgnosis Songs Fund Limited, the first UK listed
investment company offering investors a pure-play exposure to songs
and associated intellectual property rights, and its Investment
Adviser, Hipgnosis Song Management Limited, are pleased to announce
the Company's final results for the year ended 31 March 2023.
Financial Highlights
-- Operative NAV per share increased 3.6% year-on-year to
$1.9153 (31 March 2022: $1.8491), driven primarily by a 4.0%
increase in the Fair Value of the Portfolio with the Portfolio
Independent Valuer determining their discount rate should remain
unchanged at 8.5%
o As at 31 March 2023, Operative NAV per share in Sterling was
154.91p (Sterling: Dollar exchange rate 1.236);
o As at 11 July 2023, Operative NAV per share in Sterling was
148.51p (Sterling: Dollar exchange rate 1.2897 ).
-- Total $ NAV Return to Shareholders at period end, including
27.9 cent per share of dividends declared, has been 69.0% since the
IPO on 11 July 2018.
-- Gross revenue $177.3 million (Year ending 31 March 2022:
$200.4 million); Net revenue $147.2 million (Year ending 31 March
2022: $168.3 million)
o Reduction in IFRS revenue due to the initial recognition of
the Usage accrual ($36.0 million) and FY22 non-recurring RTI ($14.1
million) in the prior year, partly offset by the CRB III
retroactive accrual ($16.1 million) in the current year;
o Excluding the impact of these adjustments, Net revenue grew by
10.9% year-on-year.
-- Pro-forma Annual Revenue (PFAR), which shows the royalty
revenue earned by Catalogues in a calendar year largely based on
royalty statements, for the twelve months to 31 December 2022 grew
12.1% year-on-year to $130.2 million from $116.1 million despite
currency headwinds
o Continued growth in streaming income, up 14.8% to $52.1
million from $45.4 million, and synchronisation income, up 24.7% to
$19.4 million from $15.6 million;
o 9% increase in performance revenues to $30.8 million from
$28.3 million, as a small H1 decline was more than off-set by a 41%
increase in H2, strongly suggesting revenue from post-Covid-19
lockdown recovery is now being paid through;
o Classic iconic songs deliver strong performance with >10
years catalogues income up 11.4% year-on-year. Income from younger
catalogues (<10 years) up 13% year-on-year, providing further
evidence younger catalogues are reaching the end of their natural
decay curve.
-- Ongoing Charges fell to 1.21%, from 1.54%.
-- Total dividends declared of 5.25p per ordinary share were
fully covered 1.08x by leveraged free cash flow.
-- Net debt of $562.0 million as at 31 March 2023 (31 March
2022: $569.9 million) represents 24.3% of Operative NAV (31 March
2022: 25.4%).
Operational Highlights
-- New Revolving Credit Facility agreed and interest rate swaps
implemented providing certainty over interest payment, a lower
margin cost than the previous facility and greater operational
flexibility.
-- US Dollar to Sterling foreign exchange hedges put in place in
October 2022 providing $50 million of forward contracts.
-- High profile synchs include Blink-182's All the Small Things
as the soundtrack to the iconic 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 Number 1 on the Billboard Hot 100
in the US as well as being a top five hit in the UK.
-- Administration partnerships with Sacem and peermusic, which
reduced third party administration and collection costs by 6.6% and
reduced payment to as little as four months on the 6,200 Songs
reverted to date.
-- Trials of multi-territory live performance direct revenue
collection services delivering faster payments and substantially
lower third party costs.
-- US Copyright Royalty Board (CRB) confirmed substantial CRB
III increases for mechanical streaming rates and accepted industry
proposal supported by Hipgnosis' advocacy for additional increases
for 2023-2027 period.
Commenting on the results, 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 5-year history. Streaming revenues have grown
strongly; the success of active Song Management is clearly visible
in our Synch successes; Performance revenues were very strong with
41% second half growth demonstrating their return following Covid
lockdowns; and, our over ten 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.
"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. We look forward to updating the market prior to
the AGM and the Continuation Vote.
"Today's financial results, being released two days after the
5(th) anniversary of our IPO, offer the perfect milestone to
re-consider Hipgnosis' investment case and its ongoing
opportunity.
"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 Catalogues is iconic and, significantly, was selected
specifically to benefit from the growth in music streaming.
"Since then our thesis has become reality and we have
transitioned from an era where almost all consumption of music was
unpaid to one where almost all consumption of music is being paid
for. This has enabled us to deliver a 69% Total $ NAV Return since
IPO.
"Looking forward, I believe there is continued reason for
optimism. Despite the global economic challenges, our markets
continue to grow with strong earnings being reported by the
administrators that sit ahead of us in the payment chain. In
addition, the increasing adoption of streaming not only continues
strongly but has also demonstrated its pricing power with price
rises introduced by several DSPs in the year signifying the
excellent value that music streaming delivers to the consumer, even
in a high inflation environment. As a result, Goldman Sachs, in
their recent 2023 Music in the Air report, increased global music
publishing market annual growth expectations to 7.6% from 5.9%
through to 2030.
"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. Both the Board and I are determined to deliver
this."
Results presentation
The Investment Adviser will be hosting a webinar for analysts
and investors today, 13 July, at 1000 BST.
Registration for the live webcast is available at:
https://www.lsegissuerservices.com/spark/HipgnosisSongsFundLtd/events/17896f4e-5aa3-44ce-8303-1d15f263d1af
.
A video recording of the event will be made available on the
Company's website (www.hipgnosissongs.com) after the event and the
slides are available at
https://www.hipgnosissongs.com/results-center/ .
For more information:
For further information please contact:
Hipgnosis Song Management
Merck Mercuriadis
Chris Helm
Giles Croot (Media) +44 (0)20 4542 1511
Rufina Pavry (Investors ) +44 (0)20 4542 1530
Singer Capital Markets - Joint Corporate
Broker
James Moat / James Maxwell / Alex Emslie
(Corporate Finance)
Alan Geeves / James Waterlow / Sam Greatrex
(Sales) +44 (0)20 7496 3000
J.P. Morgan Cazenove - Joint Corporate Broker
William Simmonds / Jérémie Birnbaum
(Corporate Finance)
James Bouverat (Sales) +44 (0)20 7742 4000
RBC Capital Markets - Joint Corporate Broker
Elliot Thomas / Max Avison (Corporate Finance)
Lisa Tugwell / Natalia Lipecka (Sales) +44 (0)20 7635 4000
Ocorian - Company Secretary & Administrator
Lorna Zimny +44 (0) 28 9693 0222
The Outside Organisation
Alan Edwards / Nick Caley +44 (0)7711 081 843
Headland Consultancy
Susanna Voyle / Del Jones / Charlie Twigg +44 (0) 20 3805 4822
All US music publicity enquiries
Fran Defeo +1 917 767 5255
Notes to Editors
About Hipgnosis Songs Fund
Hipgnosis, which was founded by Merck Mercuriadis, is a Guernsey
registered investment company established to offer investors a
pure-play exposure to songs and associated musical intellectual
property rights. The Company has raised a total of almost GBP1.3
billion (gross equity capital) through its Initial Public Offering
on 11 July 2018, and subsequent issues in April 2019, August 2019,
October 2019, July 2020, September 2020, February 2021 and July
2021. In September 2019, Hipgnosis transferred its entire issued
share capital to the Premium listing segment of the Official List
of the FCA and to the London Stock Exchange's Premium segment of
the Main Market, and in March 2020 became a constituent of the FTSE
250 Index. Since April 2021, the Company has been resident in the
UK for tax purposes and is recognised as an investment trust under
applicable HMRC regulations.
About Hipgnosis Song Management Limited
The Hipgnosis Songs Fund's Investment Adviser is Hipgnosis Song
Management Limited , which was founded by Merck Mercuriadis, former
manager of globally successful recording artists, such as Elton
John, Guns N' Roses, Morrissey, Iron Maiden and Beyoncé, and hit
songwriters such as Diane Warren, Justin Tranter and The-Dream, and
former CEO of The Sanctuary Group plc. The Investment Adviser has
assembled an Advisory Board of highly successful music industry
experts which include award winning members of the artist,
songwriter, publishing, legal, financial, recorded music and music
management communities, all with in-depth knowledge of music
publishing. Members of Hipgnosis Song Management Limited Advisory
Board include Nile Rodgers, The-Dream, Giorgio Tuinfort, Starrah,
David A. Stewart, Poo Bear, Bill Leibowitz, Ian Montone and Rodney
Jerkins.
Introduction from Merck Mercuriadis
These financial results are an important validation of Hipgnosis
Songs Fund's investment thesis, delivering the best like-for-like
income growth in our short history.
These results demonstrate the value of our strategy, with
Operative NAV per share growth of 3.6% year-on-year to $1.9153,
underpinned by strong increases in royalty statement income. Taken
together with dividends declared since launch until 31 March 2023,
of 21.6p (27.9c), we have delivered a 69% Total $ NAV Return to
Shareholders since IPO on 11 July 2018, as we continue to benefit
from the growth in streaming and higher Synch revenues generated by
the Company's unparalleled Portfolio of Songs.
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 transformational growth of
streaming. In addition, we considered that we could deliver an
exceptional return by acquiring iconic Songs while they were still
attractively priced.
Since then our thesis has become reality and we have
transitioned from an era where almost all consumption of music was
unpaid to one where almost all consumption of music is being paid
for. This set of results is an early indication of what's to come
in the future.
People listen to iconic Songs whatever the macroeconomic
conditions; the change in the way in which we consume music means
that, increasingly, when we hear a song, a payment is being
generated; music streaming continues to grow with its utility-like
revenues, with the number of paid subscribers globally growing by
13% year-on-year to around 600 million, according to the IFPI,
including over 100 million paying subscribers in the US.
Importantly, around the world the true value of Songs and
Songwriters is increasingly being recognised.
Nevertheless, the current share price does not reflect the
success of our investment strategy and I know all Shareholders
share my frustration and disappointment that this is the case. When
we launched the Company, we created a new asset class with Songs.
It is therefore perhaps not a surprise, that in a world of
incredible turmoil following a global pandemic, the largest war in
Europe in nearly 80 years and increasing inflation and interest
rates, that some investors have turned to "risk free" safe havens
over exposure to new asset classes. However, despite these unique
macroeconomic conditions, the strong growth in paid consumption for
music continues. The Music industry is rapidly growing and thriving
while others contract and as a result, Song catalogues continue to
be a highly attractive asset.
We are 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 the Company's largest Shareholders, on a
number of options to enhance Shareholder value.
We intend to update the market prior to the Annual General
Meeting (AGM) and the Continuation Vote.
Strong underlying growth
IFRS Net Revenue, which is based on the Group's accounting
policies (including accruals), was $147.2 million and decreased
from $168.3 million due to a number of non-recurring elements
identified and called out in the prior and current period. These
include non-recurring Right to Income (RTI), the initial
recognition of the Usage Accrual and the impact of the retroactive
CRB III revenue due. Excluding the impact of these adjustments,
IFRS Net Revenue grew by 10.9% year-on-year.
In order to provide Shareholders with an understanding of the
like-for-like performance of the Company's revenues, by removing
the current year impact of non-recurring items, we provide our Pro
forma Annual Revenue (PFAR) data which is primarily based on actual
royalty statements. In 2022, PFAR increased 12.1% year-on-year to
$130.2 million (2021: $116.2 million). This is despite the US
Dollar's very strong performance against almost all other major
currencies during the year.
Streaming is a key driver of income growth and grew by 14.8%
year-on-year in 2022, making up just over 40% of our PFAR income.
Income from Synch revenue continues to show strong growth of 24.7%
year-on-year in 2022. Significantly, Performance income, which had
been suppressed since the Covid-19 lockdowns is now demonstrably
coming back as consumption returns to even greater than pandemic
levels. A small year-on-year decline in the first half of 2022 was
more than off-set by a 41% increase in the second half. Taking into
consideration the time lag inherent in the payment of performance
income, this is a very positive indicator for the future and gives
us a 9% year-on-year increase for 2022.
I believe that there are two reasons why the Company's income
has outperformed this year:
Firstly, the Songs in our Portfolio.
-- We have bought carefully and we bought well by investing in
Songs which we believe will stand the test of time and will be
listened to for generations. The Company's Portfolio of Songs is
unrivalled for its extraordinary success and cultural importance.
We have a relatively small portfolio with a very high ratio of
success, which makes it efficient to manage as the Songs are in
high demand. Significantly, we selected catalogues which we
believed were well placed to benefit from the growth in music
streaming. The Company owns nearly 25% of all Songs played over a
billion times on Spotify ("Spotify's Billions Club"), over 10% of
Rolling Stone's The 500 Greatest Songs of All Time and Songs on 16
out of the Top 40 UK best-selling albums of the first six months of
2023.
Secondly, our active Song Management.
-- We drive consumption and value through Song management of the
Catalogue to individual listeners, music creators and business
music users, as well as harnessing consumer platforms through which
the Catalogue can be showcased and consumed.
-- We optimize revenue generation, revenue collection and value
by ensuring accurate registration and rights enforcement of the
Songs in the Catalogue, then collect revenues as efficiently and
cost-effectively as we can.
-- We campaign to change the position of Songwriters in the
economic equation by working with politicians, NGOs and the wider
music community to build support for increased fairness in payments
for Songwriters. For the Songs which we've purchased, the Company
stands in the shoes of the Songwriters, so our interests are
perfectly aligned.
Looking at the wider picture, the US Recorded Music revenues
collected by the RIAA show that revenues are now back above the
historic highs at the start of the millennium. Despite the general
economic slowdown caused by rising interest rates, music and the
Songs that underpin it is prospering. Particularly notable is the
continued growth of music streaming with its utility-like revenues.
The best days of the music industry and rights ownership are ahead
of us and we believe that the capital appreciation in our portfolio
is still in its infancy as we grow towards 2 billion paid premium
streaming subscribers over the next 10 years. In this context, it's
not surprising that the market analysts at Goldman Sachs and J.P.
Morgan, amongst others, expect music industry revenue growth to
continue for the foreseeable future.
The net increase in the Fair Value of the Portfolio of 4.0%
year-on-year to $2.80 billion and the increase in the Operative NAV
per share of 3.6% year-on-year to $1.9153 was driven by revenue in
excess of the Portfolio Independent Valuer's forecast.
Active management of our Portfolio
Whilst we benefit from the wider market growth, we continually
add value through our active Song Management of the Company's
portfolio. These activities increase the value of our Songs both by
bringing them to new audiences and ensuring we are paid what we are
due as quickly as possible. Examples for the year include:
-- Placing a remix of Journey's 1983 song Separate Ways (Worlds
Apart) in season 4 of Netflix's hit Stranger Things. The Company
owns rights for both Jonathan Cain's 50% share of the publishing
and 66% of the master recording. The synch generated a six figure
fee and also drove a significant increase in streaming consumption,
encouraged further synchs of the Song and a new cover version.
-- Placing Nile Rodgers as the face of Chanel Eyewear as well as
the first and only "Artist In Residence" at Apple Music. We have
also presented CHIC's first five albums and Sister Sledge's We Are
Family in Spatial Audio on the service, as well as securing a
significant six figure synch for the song Spacer with Renault in
Europe. These initiatives have introduced our iconic songs,
co-written by Bernard Edwards, to a new generation of fans and are
driving increased streaming consumption.
-- Placing a cover version of Blink-182's All The Small Things ,
co-written by Tom Delonge whose catalogue we purchased in 2019, as
the soundtrack for John Lewis's 2022 Christmas advert - one of the
most coveted Synchs in the World.
-- Rihanna performing four Hipgnosis Songs Fund co-owned Songs
during her set at the 2023 Superbowl: Birthday Cake (The-Dream),
All Of The Lights (Jeff Bhasker / The-Dream), Run This Town (Jeff
Bhasker / No I.D.) and Umbrella (The-Dream / Tricky Stewart). Close
to 119 million viewers tuned in for her performance on television
and streaming services, with each of the Songs recording gains on
streaming platforms of up to 280% in the week following her
performance. Four months on, Umbrella's US weekly
Streaming-on-Demand figures are still 1.3 times that pre the
Superbowl; Run This Town is showing 1.5x the demand and this has
led to further synch placements.
-- Our new recording of Bon Jovi's Wanted Dead or Alive , by
Empara Mi was commissioned to specifically to appeal to the Synch
market. It was successfully placed, as the global trailer for
Transformers: Reactivate, a major forthcoming video game. It
generated six figure fees for both the publishing and the new
recording which we participate in.
-- Placing Richie Sambora as a contestant on the UK version of
The Masked Singer. Four of the six Songs that he performed on the
series were from the Company's portfolio. When he was revealed in
the semi-final, his profile reached a recent all-time high. There
was an increased streaming consumption of the Bon Jovi songs as
well as the four songs held by the Company that he performed on the
series including Go Your Own Way and Smooth.
-- Nicki Minaj interpolated our iconic Rick James song Super
Freak into Super Freaky Girl making it a Number 1 single in the US
and Top 5 in the UK and around the world, driving over 1 billion
new streams across all digital service. It also increased streaming
consumption on the original Super Freak and U Can't Touch This by
MC Hammer which is another iconic Super Freak interpolaton.
-- Entering a direct licensing and administration partnership
for digital royalties of reverted catalogues with Sacem, a
world-leading Collection Management Organisation. This is
materially cutting collection times, reducing collection costs and
is delivering an increase in revenues.
Artificial Intelligence
Recent developments in Artificial Intelligence (AI) tools offer
new opportunities which we are already looking to use in support of
our iconic Songs. The enduring success of our Songs is down to the
strong emotional connection they have with millions of consumers
all over the world and they are therefore always in demand. AI
enables us and other creators to quickly and cost effectively
deliver new versions of these Songs, create interpolations or
otherwise introduce our music to new audiences. Global copyright
laws provide a significant degree of protection for our
Intellectual Property. Nonetheless we are working with legislators
who are actively looking at how to fill any gaps which are created
by this new technology and we will support measures which prevent
AI from learning from in-copyright music and recordings to the
detriment of artists and Songwriters.
Our activities within the Songwriter community
Songs are the currency of the music business; without the Song
there simply is no music industry. Yet Songwriters - who deliver
the most important component to the success of a record company,
digital service provider, music merchandiser or live promoter - are
still the lowest paid people in the economic equation.
We have always been clear that our motive is to establish Songs
as an asset class and to provide a great return for our investors.
Concurrently, our "ulterior" motive has always been to use our
success to help take the Songwriter from the bottom to the top of
the economic equation. This is in complete alignment with our
Shareholders' best interest.
Over the last five years we have made demonstrable progress. We
advocated for and welcomed the moves by the US Copyright Royalty
Board (CRB) and the wider music industry in the US to increase the
rates paid to Songwriters and publishers.
CRB III provided for a 44% increase in the headline rate of
Digital Service Providers (DSP) revenues paid to Songwriters and
Publishers in the US, reaching 15.1% in 2022. It was disappointing
that some streaming services appealed the original ruling, delaying
much needed payments to Songwriters, many of whom rely on royalty
payments for everyday living expenses. The appeal was rejected
during 2022 and the industry is now working to ensure that the
higher rate payments due for the CRB III period reach rights
holders. The Company has accrued $21.7 million to account for the
CRB III monies due to date.
We were pleased to support a joint industry proposal for CRB IV
which saw the proportion of DSP revenue paid to Songwriters further
rise, incrementally, to 15.35% in 2027, while the royalty payable
on a physical sale or download is rising from 9.1 cents to 12 cents
with additional inflationary increases. Whilst there is still a
long way to go before Songwriters are fairly remunerated, these are
important steps in the right direction.
The joint CRB IV proposals, which have now been confirmed, show
there is increasing acceptance across the music industry that
Songwriters should be fairly rewarded for their work. Whilst the
increase is more modest than the CRB III rises, we support it as it
will provide a background of stability at the highest streaming
rates ever paid in the context of which we can continue our
advocacy efforts for an even bigger share of the pie.
In the UK, the Competition and Markets Authority (CMA) concluded
their market study and recommended that the Intellectual Property
Office (IPO) take forward a number of workstreams. After the year
end, the IPO announced an agreement on how the music industry and
the Government will work together to deliver consistent
high-quality metadata. We welcome this first step, however, we
believe that far greater reform is needed and we continue to engage
with the relevant organisations to achieve this change. The UK
Government has also recently announced it has accepted a
recommendation from the Culture, Media and Sport Select Committee
(to whom Hipgnosis gave evidence) to establish an industry working
group to explore issues around fair pay for creators in the music
streaming industry. Our ultimate goal is for Songwriters' pay to be
determined by the free market, not legislation.
We also supported BMI in its Live Concert rate victory, which
set a new rate 138% higher than the previous one, reflecting the
importance of Songs in the live concert experience. As we've stated
before, live concerts would not exist without Songs.
Outlook
These results highlight the continuing validity of our
investment thesis. Our markets are buoyant and continue to grow.
Streaming, increasingly, provides a utility-style income for
holders of Song royalties and the increasing demand for Song
Catalogues from Private Equity funds and the major record labels
demonstrates the attractiveness of this asset class. Hipgnosis
Songs Fund, with its portfolio of iconic, culturally significant
Songs, is uniquely placed to benefit its Shareholders and deliver
superior Shareholder returns over the medium term and we are
committed to taking whatever action is necessary to deliver
this.
With year-end results delivered, our focus is on re-rating the
shares, passing the Continuation Vote at the forthcoming Annual
General Meeting and delivering a great 2024 and beyond.
I take my responsibility to our Shareholders very seriously.
From the 42 institutional investors that we started with in 2018 to
the many hundreds of institutional and retail Shareholders we have
today, I have always stated that, while iconic Songs with high
quality long term cashflows provide great income for investors, the
real purpose of this Company is for our Shareholders to be the
beneficiaries of the substantial Net Asset Value growth which we
believe will come over the next 10 years as the market in which we
operate in grows to as many as 2 billion paid streaming subscribers
around the world, who will in turn increase the consumption of our
already extraordinarily successful Songs. I strongly believe we are
well on our way to achieving that.
Finally I would like to thank each and every one of you who have
supported us in establishing Songs as an asset class as well as the
great Songwriters who have entrusted us with being custodians of
their special Songs and Catalogues.
Merck Mercuriadis
Founder, Hipgnosis Songs Fund Ltd and
Founder/CEO, Hipgnosis Song Management Ltd.
12 July 2023
The Chair's Statement
I am pleased to present the Company's Annual Report and Accounts
covering the 12 months ended 31 March 2023.
It is now five years since your Company was launched in July
2018 and its shares were listed on the London Stock Exchange. We
are proud to have been a FTSE 250 company since March 2020. Our
objective at launch was to create a Company which provided
investors with exposure to Songs and associated intellectual
property rights. We believed then, and have demonstrated since,
that music royalties provide long-term, stable income streams.
Equally importantly, when the Company was launched, we believed
that these long-term revenue streams were at an inflection point
and would increase significantly as a result of the strong growth
expected in paid for music streaming. Since IPO, this growth has
seen music industry revenues return to levels not seen in 20 years
and we and our Investment Adviser fully expect that this growth
will continue for the foreseeable future.
The Company's first five years have not been without their
challenges: the lockdowns put in place by Governments around the
world to combat the spread of Covid-19 had a material impact as
clubs, gyms, restaurants and shopping centres were forced to close
and touring stopped, leading to a decline in performance royalty
revenues. Due to the time lag inherent in publishing industry
payments, it is only now that the Company is experiencing these
revenue streams recovering.
Equally, the increase in global interest rates over the last 24
months, as central banks seek to control inflation, caused in large
part by Covid-19 and the energy crisis attributable to the war in
Ukraine, has been a challenge both directly and indirectly.
Directly, the increase in the cost of the Company's debt has had to
be managed and last year the Company refinanced its Revolving
Credit Facility (RCF). Indirectly, increased yields on government
securities have provided income-focused investors opportunities to
invest risk free at yields approaching the yield on the Net Asset
Value of the Company's shares. Whilst government securities may
currently provide a similar current income yield, they do not offer
the opportunity for the significant capital growth that we believe
your Company will also provide. Furthermore, the underlying
strength of the business model has enabled the Board to maintain
its target annual dividend at 5.25p per Ordinary Share.
While these results published demonstrate the strength of the
Company's business, the Board shares your disappointment that the
Company's share price is substantially below its Operative Net
Asset Value, particularly given the quality of the Company's assets
and the ability of the Investment Adviser to drive additional value
through active Song Management.
Although the majority of London listed investment trusts are
currently trading at a discount, we recognise that this is of no
comfort to our Shareholders. Therefore, following a consultation,
with many of our larger Shareholders, the Board has been working
with the Investment Adviser on a number of options to enhance
Shareholder value.
The ultimate decision on which options will be progressed, if
any, will be taken in consultation with our Shareholders. We look
forward to updating you further in due course, and well in advance
of the Company's AGM this September at which the Company will table
its scheduled five-year Continuation Vote.
The Company has always believed, as reflected in its Investment
Policy, that the best way to maximise Shareholder value has been to
buy and hold great assets, to enable Shareholders to benefit from
the income and capital growth that we expect these assets to
deliver over time.
Given the options the Board is considering, the current share
price and the upcoming Continuation Vote, the Board is publishing
an estimate of the potential tax charge, based on certain
assumptions, in the event that a sale of all assets should occur.
Full details are provided in Note 12.
Despite the disappointing share price performance over the last
year the Board continues to be confident in our core investment
case: the continuing long-term growth of revenue in the music
industry and the ability of the Investment Adviser to drive
additional value through active Song Management of our incredible
portfolio of iconic Songs.
We continue to be confident that your Company will provide
superior returns over the medium term and we encourage all
Shareholders to support the continuation of the Company.
Performance
The IFRS Net Asset Value (NAV) per share as at 31 March 2023 was
$1.1863 which is a 9.2% decrease from $1.3065 as at 31 March 2022,
largely reflecting the amortisation of the Company's Catalogues in
accordance with applicable accounting protocols and ignoring their
current fair value.
The Board considers that the most relevant financial indicator
for Shareholders is the Operative NAV, which reflects the Fair
Value of the Company's Catalogues as valued by the Portfolio
Independent Valuer and adds back the amortisation charge applicable
under IFRS.
The Operative NAV per share increased by 3.6% to $1.9153 during
the year (31 March 2022: $1.8491). This, together with total
dividends, of 21.6p (27.9c), takes Total $ NAV Return to
Shareholders since the IPO on 11 July 2018 to 69.01%.
Based on the Sterling to US Dollar exchange rate on 31 March
2023 of 1.236, the Operative NAV presented in Sterling would be
154.91p per share (31 March 2022: 140.79p based on Sterling to US
Dollar exchange rate of 1.3134).
As a result of the strong performance of certain Catalogues, a
Catalogue bonus provision was recognised. This is based on actual
and expected future Catalogue performance that is highly probable.
Whilst these liabilities are recognised in the current year, the
Company doesn't anticipate that these liabilities will be incurred
at a material level in future years.
Our approach to valuation
Although the Board is ultimately and solely responsible for
overseeing the valuation of the Company's investments in music
Catalogues it has appointed the Portfolio Independent Valuer to
perform this specialist work.
The Fair Value of the Portfolio increased by 4.0% to $2.80
billion (31 March 2022: $2.69 billion), mainly as a result of
royalty statements received exceeding expectations, especially
those related to performance income and streaming income from older
vintage catalogues. This also drove the increase in the Operative
NAV in Dollar terms over the period.
The Board recognises that there are a range of views on the
assumptions that could be applied in the valuation of the Company's
investment portfolio.
In advance of the last Interim Report published in December
2022, the Board appointed Kroll Advisory Limited ("Kroll"), an
independent valuation firm, to consider and advise on the
reasonableness of certain assumptions commonly employed in the
valuation of music catalogues based on data provided by the
Company.
Following year end, in addition to considering the discount rate
and growth assumptions applied by the Company's peers as well as
observing transaction comparables, the Board has continued its
engagement of Kroll solely in connection with the ongoing review of
the assumptions used in and calculation of a discount rate applied
in the valuation of the investment portfolio. We note that Kroll
did not review or opine on the projected cash flows or on a
valuation conclusion using their determined discount rate.
Different valuation practitioners use differing methodologies,
approaches and assumptions to calculate their discount rates. In
particular, valuation practitioners may select different input
assumptions based on their professional judgement, including, but
not limited to the appropriate set of peer groups, the length of
calculation period for market data when estimating the equity risk
premium, the beta and the risk-free rate. As a result, there may be
variation amongst valuers, providing the Board with complementary
insights.
The period since 30 September 2022 has seen significant
volatility, as global investors grappled with the impact of
inflationary pressures and the continued hike of policy interest
rates by major central banks. The resulting equity market
uncertainty contributed to a higher equity risk premium and an
increase in the Company's shares' correlation to market indices.
Meanwhile, risk-free rate inputs, particularly 10- and 20-year US
Treasury yields, experienced significant volatility during this
period, initially rising and then declining to levels somewhat
lower than in September 2022.
The Board notes that for the period ending 30 September 2022,
the discount rate of 8.5% applied by the Portfolio Independent
Valuer was within the range identified by Kroll at the interim
results. For the most recent period ending 31 March 2023, whilst
the Portfolio Independent Valuer maintained its discount rate of
8.5%, the Kroll calculation reflected a 50 basis points increase in
the Equity risk premium applied to 6.0% and an increase in the
relative volatility of share prices in the Company's music peer
group relative to the overall market.
The Board has continued to engage Kroll subsequent to the year
end and note that Kroll has since (as of the end of June 2023)
lowered its Equity risk premium assumption to the previous level of
5.5%, although their view still remains slightly higher than the
Citrin Cooperman rate.
The Board will continue to keep all assumptions in its valuation
methodology under review. Having considered all the available
information, the Board believes that the assumptions applied by the
Portfolio Independent Valuer remain appropriate and that this
represents a reasonable assessment as to the value of the
Portfolio.
Revenue
IFRS Net Revenue, which is based on the Group's accounting
policies (including accruals), was $147.2 million and decreased
from $168.3 million due to a number of non-recurring elements
identified and called out in the prior and current period. These
include non-recurring Right to Income (RTI), the initial
recognition of the Usage Accrual and the impact of the retroactive
CRB III revenue due. When excluding the impact of these
adjustments, it grew by 10.9% year-on-year.
However, our Pro Forma Annual Revenue (PFAR), a like-for-like
revenue analysis per calendar year, based primarily on royalty
statements, grew 12.1% in 2022 to $130.2 million (2021: $116.2
million). This reflects strong growth in Streaming (+14.8%
year-on-year) and Synch (+24.7% year-on-year) income as well as a
recovery from the impact of Covid-19 lock-down in Performance (+9%
year-on-year) income.
Revolving Credit Facility
On 30 September 2022, the Company entered into a new Revolving
Credit Facility (RCF) which runs for five years until 30 September
2027, with a commitment of $700 million. The facility was used to
refinance, in full, the Company's pre-existing RCF and provide
flexibility for additional working capital where necessary. In
accordance with the Investment Policy, any borrowings by the
Company will not exceed 30% of the value of the net assets of the
Company. As at 31 March 2023, the Company had $600 million drawn
down under the RCF. Net debt as a percentage of Operative NAV
decreased to 24.3% (31 March 2022: 25.4%).
The Board's objectives in the refinancing were to reduce
interest rate risk and control variable costs. To deliver on these
objectives, the Company also entered into interest rate swap
agreements. As a result, until 2 January 2023, interest on all the
drawn debt was fixed at 5.71% (including debt margin). Since 3
January 2023, $340 million has been hedged for the duration of the
RCF (until 30 September 2027) at a fixed rate of 5.67% (including
debt margin); a further $200 million is hedged until 3 January 2026
at a fixed rate of 5.89% (including debt margin). The balance
remains unhedged to provide flexibility in the operation of the
RCF.
Share buybacks
The Board considers that it is not in Shareholders' interests
for the Ordinary Shares of the Company to trade at a significant
discount to the prevailing NAV in normal market conditions. The
Board considers that normal market conditions have not prevailed in
the last few years. Discounts of investment trusts, particularly
those investing in illiquid assets, have generally widened over the
last year.
The Board believes that the most effective means of minimising
any discount at which the Ordinary Shares may trade is for the
Company to deliver strong, consistent, long-term performance from
the investment Portfolio. However, wider market conditions and
other considerations inevitably affect the rating of the Ordinary
Shares from time to time.
In determining whether a share purchase would enhance
shareholder value, the Board will take into account market
conditions, the Company's performance, any known third-party
investors or sellers, the impact on liquidity and total expense
ratios and of course the level of discount to net asset value at
which the shares are trading. Any purchases will only be made at
prices below the prevailing net asset value and where the Board
believes that such purchases will enhance shareholder value. On 14
October 2022, the Board announced a share buyback programme funded
out of free cash flow.
During the financial year under review, a total of 2 million
Shares were purchased into treasury with an aggregate value of
GBP1.7 million. Ordinary Shares held in treasury may only be
reissued by the Company at prices representing a premium to NAV per
Ordinary Share as at the date of re-issue.
The Board recognises its modest buyback activities to date
showed intent rather than having a material impact on the share
price discount. We expect more material share buybacks may play an
important part of the Company's strategy as we move forward.
Dividends
As set out in last year's annual report, dividend payment dates
have been adjusted so that payments are made on or around the last
working day of January, April, July and October, in order to better
align dividend payments with revenue receipts. Dividends will be
declared ex dividend in the month prior to payment wherever
practicable.
Dividends paid in the year of $56.3 million were covered 1.44x
by Distributable Revenues recognised during the year. Dividends
declared in the year amount to $75.9 million, which were covered
1.07x by Distributable Revenues recognised during the year.
In addition, the Company was covered 1.45x on a Leveraged Free
Cashflow basis, demonstrating the funds necessary to meet those
dividend payments paid in the year, and 1.08x on a Levered Free
Cashflow necessary to meet those dividends declared in the
year.
On 12 October 2022, the Company entered into a series of US
Dollar to Sterling foreign exchange forward contracts in order to
limit its exposure to foreign exchange rate risk and to provide
certainty on the US Dollar value of future Sterling dividend
payments. This passive rolling hedging strategy ensures that there
are GBP50 million of forward contracts in place at any time,
broadly equivalent to the Company's quarterly Sterling dividend
obligation. The foreign exchange forward contracts were initially
in place until April 2024 and have, subsequent to the year end,
been rolled forward to October 2024.
The Board
Following the year end, Vania Schlogel stepped down as a
Non-executive Director on 30 April 2023 in order to focus on her
executive role at Atwater Capital, which she founded in 2017 and
which has recently demanded a significant increase in her
commitment. I thank Vania for her work and contribution to the
Company while she was a Director.
We have recently announced the appointment of an additional
director, Cindy Rampersaud, with effect from 1 August 2023, and are
delighted to welcome Cindy to the Board.
I would like to thank my fellow Directors for their diligence
and dedication on your behalf over the last year. With the
exception of Vania, all Directors who have held office throughout
the financial year are offering themselves for re-election at the
forthcoming Annual General Meeting.
Additionally, I extend my thanks to Merck Mercuriadis and the
team that works with him at our Investment Adviser. Over the last
five years I have seen a transformation in the sophistication of
their operations, but one thing which has never changed is Merck's
passion, and his team's hard work, to deliver value for the
Company's Shareholders. This has been particularly demonstrated
over the last 12 months where they have continued to invest and
improve their capabilities and the service they provide your
Company.
Annual General Meeting
The Company's Annual General Meeting will be held before the end
of September. Notice of the Annual General Meeting, containing full
details of the business to be conducted at the meeting, will be
published to Shareholders in due course.
Outlook
Despite the inflationary pressures in the global economy and the
accompanying interest rate rises, consumers continue to enjoy and,
crucially, spend money on music.
Performance revenues, which were severely impacted by Covid-19
lockdown measures, are returning.
Ongoing growth in paid-for music streaming supports our belief
that this form of entertainment is increasingly seen as a utility
purchase, recognising the exceptional value for money music
streaming services provide their customers.
Regulatory changes in the US, with the Copyright Royalty Board
affirming their CRB III ruling and an agreement across the industry
on further increases for the CRB IV period, help to support revenue
growth.
Active Song Management, demonstrable by the Investment Adviser,
creates additional value from your Portfolio of iconic, culturally
significant Songs.
As a result, the Board is confident that your Company will
deliver superior returns over the medium term.
The Board continues to engage with Shareholders and is working
hard to demonstrate the value of the Company's assets and enhance
Shareholder value.
Andrew Sutch Chair
12 July 2023
Investment Adviser's Report
It is now five years since Hipgnosis Songs Fund was launched in
July 2018 and its shares were listed on the London Stock Exchange,
before graduating to the FTSE 250 in March 2020. Our objective was
to provide investors with exposure to iconic Songs. In that time we
have demonstrated that music royalties provide long term cashflows
that benefit from the ever growing consumption of music which has
become more convenient in the streaming paradigm. The growth of
streaming has seen music revenues return to historic highs after
the decade and a half of technological disruption and as with the
last 8 years we expect that this growth will continue for many
years to come.
Our investment case for the Company is anchored in the belief
that long-term, predictable and reliable income streams delivered
by our high-quality portfolio of Songs, underpinned by the wider
growth in global music consumption and by boosting income and
realising additional value as a result of our active Song
Management activities.
The Company owns a portfolio of iconic and culturally important
Songs. The strength of the portfolio is demonstrated by the
year-on-year increase in the Operative NAV per share, up 3.6% to
$1.9153 (31 March 2022: $1.8491). This increase is primarily due to
a 4.0% increase in the Fair Value of the Portfolio as our carefully
selected Songs outperform the expectations of the Portfolio
Independent Valuer. In Sterling terms, this equates to 154.91p per
share (GBP: USD exchange rate 1.236).
IFRS Net Revenue, which is based on the Group's accounting
policies (including accruals), was $147.2 million and decreased
from $168.3 million due to a number of non-recurring elements
identified and called out in the prior and current period. These
include non-recurring Right to Income (RTI), the initial
recognition of the Usage Accrual and the impact of the retroactive
CRB III revenue due. When excluding the impact of these
adjustments, it grew by 10.9% year-on-year.
Given the multiple non-recurring elements captured with the IFRS
revenue line and the application of accruals for revenue required
under IFRS, we also provide PFAR, a like-for-like revenue analysis
per calendar year, which is based primarily on royalties received
(i.e. reflecting royalties collected).
In 2022, PFAR grew by 12.1% year-on-year, to $130.2 million
(2021: $116.2 million). This growth is despite strong currency
headwinds as a result of the strength of the US Dollar impacting
the value of non-US Dollar denominated source income. Although the
Company receives 85% of its revenues in US Dollars, the original
source for around half of revenues is non-US-Dollar denominated.
Since third parties in the collection chain are converting
currency, a precise constant currency calculation is not possible.
However, based on average FX movements of the US Dollar in the year
against Sterling, Euro and Yen, we estimate that the impact of the
strong Dollar in 2022 was the equivalent of approximately 6
percentage points of increased differential compared to 2021,
further emphasising the strong underlying growth.
Music demonstrates continued growth
Despite the macroeconomic slowdown caused by Covid-19, the war
in Ukraine and central banks efforts to deal with inflation, the
music industry continues to demonstrate its resilience. In
particular, streaming remains a highly attractive consumer
proposition.
In their first quarter 2023 results, published in April, Spotify
reported 14% year-on-year revenue growth and 15% annual increase in
Premium subscribers. As we have previously noted, music streaming
services probably offer the best value entertainment product
available, therefore we are not surprised by its resilience. During
the year, we saw the first increase in premium streaming prices for
a number of streaming services including Apple Music, Amazon Music,
Deezer and Tidal moving beyond the GBP/$/EUR 9.99 per month price
point for an individual plan. Despite these price rises, they are
still seeing subscriber growth and it is expected Spotify and other
streaming platforms will follow suit.
Due in part to our advocacy on behalf of Songwriters and
Artists, the major record labels are increasingly recognising the
value of the content that they allow streaming platforms to use.
Rightsholders and DSPs are questioning the current streaming
business model, which pays the same per stream for high-quality
songs as is paid for unknown songs. Additionally, there is an
increased focus on solving the problem of digital trappers, stream
farms & bots, which are believed to be distorting the
distribution of streaming revenues. Given the quality of the
Company's Catalogue, we are confident that the Company's
Shareholders will eventually further benefit from improvements in
the economic equation for Songwriters.
Welcome return of Performance Revenues
The lockdowns to combat the Covid-19 pandemic forced the closure
of shops, bars, gyms and many other venues where music was played.
Additionally, it resulted in a hiatus for touring. For the music
industry, the combined impact was seen in a marked decline in
Performance income.
The inherent lags in payments, as they migrate through the
revenue collection system alongside the fact that the summer
concert seasons in 2020 and 2021 were curtailed or cancelled
resulted in a slow recovery in performance income.
In 2022, the PFAR Performance income increased by 41% in the
second half of the year. The summer of 2022 saw successful tours by
Blondie, Red Hot Chili Peppers, Lindsey Buckingham, Nile Rodgers
& CHIC, Journey and many others. Live Nation Entertainment, the
leading live entertainment company, reported record attendance at
events in 2022 - with concert attendances up 24% versus 2019
(pre-pandemic). Encouragingly, they reported in May 2023 that, for
the first time in three years, all their markets are open and they
were seeing further record levels of activity in their concerts
business.
We successfully trialled fast track collections services for
both the Blondie and Red Hot Chili Peppers tours. The objective was
to cut out middlemen, reduce costs and accelerate payments. As a
result, increased income was received from both tours and paid
through faster than normal. On one tour, in just one country, the
Company saved around $100,000 in costs. Whilst this is unlikely to
be replicated in all territories, it demonstrates the value that
can be created by this proactive approach.
Strong industry performance is already being seen by the major
music publishers, with Universal Music Publishing reporting a 13.3%
year-on-year growth in publishing revenues for the three months
ended 31 March 2023 and Warner Chappell Music reporting a 11.7%
year-on-year growth for the three months ended 31 March 2023. These
administrators sit ahead of the Company in the payment chain and
thus together these indicators give us confidence of further
publishing revenue growth in the coming years.
We continue to see a buoyant live performance market as
highlighted by sellout summer tours from Beyoncé, Taylor Swift, Red
Hot Chili Peppers, Blink-182, Neil Young, Nile Rodgers & CHIC,
Blondie, The Pretenders and many others all performing songs from
our portfolio.
Impact of Artificial Intelligence
Over the centuries music has adapted to and benefitted from many
developments in technology. In the 20(th) century distribution
moved from sheet music to recorded music, physically distributed
via vinyl or CDs, to any Songs being available at the touch of a
button via streaming; production of music has gone from hand
crafted whistles to electronic instruments recorded in 48-track
studios to being able to produce global hit songs entirely on a
laptop. Some of these technological changes have challenged the
industry - illegal downloads being the most existential. We expect
Artificial Intelligence (AI) will have both benefits and drawbacks
for the songwriting community in the 21(st) century.
Specifically, we anticipate that AI will provide competition for
new songs and artists. However, AI cannot replace the excitement of
attending a stadium concert with a star artist. More importantly,
given the Company's iconic and culturally significant portfolio, AI
will never replace the emotional connection that consumers all over
the globe have to our Songs. These Songs are part of the fabric of
our lives and part of the fabric of our society. They will be
passed down, as is already the case, for generations to come.
We expect AI to both interpolate and sample our iconic Songs and
generate new versions of these Songs that will create new IP and
additional revenues streams for the Company. These revenue streams
are expected to be protected by existing copyright legislation
around the world. If necessary, we will advocate for additional
regulations and protections. As such we look forward to having a
constructive relationship with AI music developers and sharing in
the benefits of another new technology.
The Company's Portfolio
The Portfolio as at 31 March 2023 comprised of 146 Catalogues
containing the rights to 65,413 Songs. The overall Fair Value of
the Portfolio, as determined by the Portfolio Independent Valuer,
increased by 4.0% to $2.80 billion (31 March 2022: $2.69 billion),
mainly as a result of royalty statements received exceeding
expectations, especially performance income and streaming income
from older vintage catalogues.
This valuation reflects a multiple of 20.89x historical annual
net Publisher Share income, compared to the blended acquisition
multiple of 15.93x.
The Company's Portfolio of Songs is, we believe, unrivalled in
its concentration of quality, as demonstrated by Songs in the
Portfolio being:
-- 97 of 419 of Spotify's Billions Club - Songs which have been
played more than a billion times on the service;
-- Over 10% of Rolling Stone's The 500 Greatest Songs
of All Time (52/500);
-- Almost half of YouTube's Most Viewed Music Videos
of all time (13/30); and
-- Songs on 16 out of the Top 40 UK best selling albums
of the first six months of 2023.
Portfolio as at 31 March 2023
Acquisition Total
Catalogue Date Songs
------------------------- ------------- -------
13 Jul
The-Dream 2018 302
------------------------- ------------- -------
21 Nov
Poo Bear 2018 214
------------------------- ------------- -------
28 Nov
Bernard Edwards 2018 290
------------------------- ------------- -------
17 Dec
TMS 2018 121
------------------------- ------------- -------
17 Dec
Tricky Stewart 2018 121
------------------------- ------------- -------
21 Dec
Giorgio Tuinfort 2018 182
------------------------- ------------- -------
15 Jan
Rainbow 2019 15
------------------------- ------------- -------
31 Jan
Itaal Shur 2019 209
------------------------- ------------- -------
26 Feb
Rico Love 2019 245
------------------------- ------------- -------
21 Mar
Sean Garrett 2019 588
------------------------- ------------- -------
22 Mar
Johnta Austin 2019 249
------------------------- ------------- -------
31 Mar
Sam Hollander 2019 499
------------------------- ------------- -------
31 Mar
Ari Levine 2019 76
------------------------- ------------- -------
12 Apr
Teddy Geiger 2019 6
------------------------- ------------- -------
25 Apr
Starrah 2019 73
------------------------- ------------- -------
Dave Stewart 7 May 2019 1,068
------------------------- ------------- -------
Al Jackson Jr 8 May 2019 185
------------------------- ------------- -------
15 May
Jamie Scott 2019 144
------------------------- ------------- -------
28 May
Michael Knox 2019 110
------------------------- ------------- -------
14 Jun
Brian Kennedy 2019 101
------------------------- ------------- -------
14 Jun
John Bellion 2019 180
------------------------- ------------- -------
17 Jun
Lyric Catalogue 2019 571
------------------------- ------------- -------
20 Jun
Neal Schon 2019 357
------------------------- ------------- -------
10 Jul
Jason Ingram 2019 462
------------------------- ------------- -------
12 Jul
Eric Bellinger 2019 242
------------------------- ------------- -------
23 Jul
Andy Marvel 2019 740
------------------------- ------------- -------
Benny Blanco 2 Aug 2019 93
------------------------- ------------- -------
22 Aug
The Chainsmokers 2019 42
------------------------- ------------- -------
10 Oct
Timbaland 2019 108
------------------------- ------------- -------
17 Oct
10cc 2019 29
------------------------- ------------- -------
21 Oct
Journey (Publishing) 2019 103
------------------------- ------------- -------
John Newman 5 Nov 2019 47
------------------------- ------------- -------
Jaron Boyer 5 Nov 2019 109
------------------------- ------------- -------
15 Nov
Arthouse 2019 44
------------------------- ------------- -------
Fraser T Smith 5 Dec 2019 298
------------------------- ------------- -------
Jack Antonoff 5 Dec 2019 188
------------------------- ------------- -------
Ammar Malik 5 Dec 2019 90
------------------------- ------------- -------
Ed Drewett 9 Dec 2019 109
------------------------- ------------- -------
Kaiser Chiefs (Masters) 9 Dec 2019 48
------------------------- ------------- -------
11 Dec
Jeff Bhasker 2019 436
------------------------- ------------- -------
11 Dec
Johnny McDaid 2019 164
------------------------- ------------- -------
13 Dec
Emile Haynie 2019 122
------------------------- ------------- -------
13 Dec
Brendan O'Brien 2019 1,855
------------------------- ------------- -------
18 Dec
Savan Kotecha 2019 49
------------------------- ------------- -------
23 Dec
Tom Delonge 2019 157
------------------------- ------------- -------
10 Jan
Journey (Masters) 2020 389
------------------------- ------------- -------
10 Jan
Rebel One 2020 157
------------------------- ------------- -------
10 Jan
Scott Harris 2020 129
------------------------- ------------- -------
22 Jan
Brian Higgins 2020 362
------------------------- ------------- -------
10 Feb
Gregg Wells 2020 11
------------------------- ------------- -------
28 Feb
Jonathan Cain 2020 216
------------------------- ------------- -------
28 Feb
Jonny Coffer 2020 85
------------------------- ------------- -------
28 Feb
Mark Ronson 2020 315
------------------------- ------------- -------
Richie Sambora 4 Mar 2020 186
------------------------- ------------- -------
16 Jul
Rodney Jerkins 2020 982
------------------------- ------------- -------
16 Jul
Barry Manilow 2020 917
------------------------- ------------- -------
16 Jul
RedOne 2020 334
------------------------- ------------- -------
16 Jul
Eliot Kennedy 2020 217
------------------------- ------------- -------
24 Jul
NO I.D. 2020 273
------------------------- ------------- -------
24 Jul
Pusha T 2020 238
------------------------- ------------- -------
Closer (J King & I 27 Jul
Slade) 2020 2
------------------------- ------------- -------
29 Jul
Ian Kirkpatrick 2020 137
------------------------- ------------- -------
30 Jul
Blondie 2020 197
------------------------- ------------- -------
10 Aug
Chris Cornell 2020 241
------------------------- ------------- -------
12 Aug
Robert Diggs "RZA" 2020 814
------------------------- ------------- -------
13 Aug
Ivor Raymonde 2020 505
------------------------- ------------- -------
Nikki Sixx 3 Sep 2020 305
------------------------- ------------- -------
10 Sep
Big Deal Music "BDM" 2020 4,212
------------------------- ------------- -------
10 Sep
Julian Bunetta 2020 188
------------------------- ------------- -------
10 Sep
Chrissie Hynde 2020 162
------------------------- ------------- -------
17 Sep
Steve Robson 2020 1,034
------------------------- ------------- -------
18 Sep
Rick James 2020 97
------------------------- ------------- -------
23 Sep
Kevin Godley 2020 358
------------------------- ------------- -------
24 Sep
Scott Cutler 2020 111
------------------------- ------------- -------
30 Sep
Nate Ruess 2020 59
------------------------- ------------- -------
30 Sep
LA Reid 2020 162
------------------------- ------------- -------
30 Sep
50 Cent 2020 388
------------------------- ------------- -------
30 Sep
Aristotracks 2020 152
------------------------- ------------- -------
30 Sep
B-52's 2020 96
------------------------- ------------- -------
30 Sep
Bonnie McKee 2020 78
------------------------- ------------- -------
30 Sep
Brill Building 2020 234
------------------------- ------------- -------
30 Sep
Christina Perri 2020 68
------------------------- ------------- -------
30 Sep
Dierks Bentley 2020 113
------------------------- ------------- -------
30 Sep
Editors 2020 64
------------------------- ------------- -------
30 Sep
Eman 2020 97
------------------------- ------------- -------
30 Sep
Enrique Iglesias 2020 157
------------------------- ------------- -------
30 Sep
Evan Bogart 2020 229
------------------------- ------------- -------
30 Sep
George Benson 2020 107
------------------------- ------------- -------
30 Sep
George Thorogood 2020 40
------------------------- ------------- -------
30 Sep
Good Soldier 2020 760
------------------------- ------------- -------
30 Sep
Holy Ghost 2020 62
------------------------- ------------- -------
30 Sep
J-Kash 2020 90
------------------------- ------------- -------
30 Sep
John Rich 2020 7
------------------------- ------------- -------
30 Sep
Kojak 2020 148
------------------------- ------------- -------
30 Sep
Lateral 2020 248
------------------------- ------------- -------
Lindsey Buckingham 30 Sep
(Kobalt) 2020 174
------------------------- ------------- -------
30 Sep
LunchMoney Lewis 2020 116
------------------------- ------------- -------
30 Sep
Lyrica Anderson 2020 96
------------------------- ------------- -------
30 Sep
Madcon 2020 173
------------------------- ------------- -------
30 Sep
Mark Batson 2020 210
------------------------- ------------- -------
30 Sep
Mobens 2020 1,034
------------------------- ------------- -------
30 Sep
Nelly (Kobalt) 2020 145
------------------------- ------------- -------
30 Sep
Nettwerk 2020 25,259
------------------------- ------------- -------
30 Sep
PRMD 2020 335
------------------------- ------------- -------
30 Sep
Rob Hatch 2020 167
------------------------- ------------- -------
30 Sep
Rock Mafia 2020 393
------------------------- ------------- -------
30 Sep
Savan Kotecha (Kobalt) 2020 354
------------------------- ------------- -------
30 Sep
SK Music 2020 23
------------------------- ------------- -------
30 Sep
Skrillex 2020 153
------------------------- ------------- -------
30 Sep
Stereoscope 2020 456
------------------------- ------------- -------
30 Sep
Steve Winwood 2020 215
------------------------- ------------- -------
30 Sep
Tequila 2020 1
------------------------- ------------- -------
30 Sep
Third Day 2020 212
------------------------- ------------- -------
30 Sep
TImeflies (Masters) 2020 80
------------------------- ------------- -------
30 Sep
Walter Afanasieff 2020 213
------------------------- ------------- -------
30 Sep
Wayne Wilkins 2020 113
------------------------- ------------- -------
30 Sep
Yaslina 2020 73
------------------------- ------------- -------
20 Nov
Sacha Skarbek 2020 303
------------------------- ------------- -------
27 Nov
Tricky Stewart (Masters) 2020 95
------------------------- ------------- -------
Eric Stewart 2 Dec 2020 255
------------------------- ------------- -------
Bob Rock 4 Dec 2020 43
------------------------- ------------- -------
Caroline Ailin ("New 10 Dec
Rules") 2020 2
------------------------- ------------- -------
15 Dec
Nelly 2020 240
------------------------- ------------- -------
24 Dec
Lindsey Buckingham 2020 161
------------------------- ------------- -------
24 Dec
Joel Little 2020 178
------------------------- ------------- -------
24 Dec
Jimmy Iovine 2020 259
------------------------- ------------- -------
31 Dec
Neil Young 2020 590
------------------------- ------------- -------
31 Dec
Shakira 2020 145
------------------------- ------------- -------
Brian Kennedy (Writer 31 Dec
Share) 2020 139
------------------------- ------------- -------
17 Feb
Andrew Watt 2021 105
------------------------- ------------- -------
Christian Karlsson 2 Mar 2021 255
------------------------- ------------- -------
17 Mar
Carole Bayer Sager 2021 983
------------------------- ------------- -------
18 Mar
Paul Barry 2021 510
------------------------- ------------- -------
26 Mar
Espionage 2021 151
------------------------- ------------- -------
31 Mar
Martin Bresso 2021 51
------------------------- ------------- -------
31 Mar
Andy Wallace 2021 1,242
------------------------- ------------- -------
31 Mar
David Sitek 2021 230
------------------------- ------------- -------
31 Mar
Happy Perez 2021 192
------------------------- ------------- -------
14 Jul
Red Hot Chili Peppers 2021 220
------------------------- ------------- -------
15 Jul
Kaiser Chiefs 2021 136
------------------------- ------------- -------
21 Jul
Christine McVie 2021 115
------------------------- ------------- -------
22 Jul
Jordan Johnson 2021 58
------------------------- ------------- -------
22 Jul
Stefan Johnson* 2021 58
------------------------- ------------- -------
23 Jul
Rhett Akins 2021 564
------------------------- ------------- -------
29 Jul
Ann Wilson 2021 152
------------------------- ------------- -------
24 Aug
Elliot Lurie 2021 70
------------------------- ------------- -------
Total Songs 65,413
---------------------------------------- -------
* Not counted in total song count
Active Song Management
Due to their iconic nature, the Songs in the Portfolio can be
relied upon to deliver long-term, stable returns, whilst
benefitting from market growth.
However, our ethos has always been that active Song Management
can and will deliver significant additional benefits to the
Company's Shareholders. We view Song Management as having three
pillars:
-- Optimising revenue generation, revenue collection and value
by ensuring accurate registration and rights enforcement of the
Songs in the Catalogue, ensuring we collect revenues as efficiently
and cost-effectively as we can.
-- Driving consumption and value through active marketing and
pitching of the Catalogue to individual listeners, music creators
and business music users, as well as harnessing consumer platforms
through which the Catalogue can be showcased and consumed.
-- Campaigning to change the position of Songwriters in the
economic equation by working with politicians, NGOs and the wider
music community to build support for increased fairness in payments
for Songwriters. As our Shareholders stand in the shoes of the
Songwriters, what's in the best interest of Songwriters is also
what's in the best interest of our Shareholders and there is
complete alignment.
Optimising revenue generation
We have continued to implement its strategy of working with
partners who reduce administration costs, collect more money,
collect it faster and pay it through faster. At the earliest
possible opportunity we look to revert (i.e. move) Catalogues to
these partners, or renegotiate administration rates where there are
compelling reasons to maintain the current relationships.
Through the Company's wholly owned subsidiary, Hipgnosis Songs
Group's (HSG) administration capabilities, the Company benefits
from its own in-house administration function in the US.
Furthermore, in July 2022, we announced that the Company had
entered into a direct licensing and administration partnership with
Sacem, a world-leading Collective Management Organisation (CMO), to
collect digital rights for the Writers' Share and the Company's own
Publisher Share, primarily in the UK and the European Union,
starting in 2023.
Additionally, the Company entered into a sub-publishing
partnership with peermusic, the world's largest independent music
publishing and neighbouring rights administration company, for them
to administer specific Catalogues. Peermusic will collect royalties
in territories not administered by HSG or Sacem, primarily Latin
America and Asia.
Combined, the partnerships with Sacem and peermusic have
resulted in an annualised uplift of relevant earnings of 6.6%.
Further benefits of the move to Sacem include collection times for
some streaming revenues having been cut to as little as four months
from the point of use.
So far, a total of 43 Catalogues or part Catalogues, covering
over 6,200 Songs, accounting for c.11% of PFAR have now reverted to
these three partnerships.
The transition of Catalogues to Sacem and peermusic required
significant preparation work by the Copyright team, including
scaling up certain administrative processes, such as becoming
Common Works Registrations (CWR) compliant. Working with our own
in-house administrator in the US, HSG, we ensured accurate delivery
of the data to enable a smooth transition.
The music industry is notorious for the fragility and inaccuracy
of data. Therefore, it is notable that Sacem reported that there
were no rejections in the 6,200 Songs which were transferred to
them, highlighting the success and accuracy of the work that our
rights administration team has been carrying out. In practice, this
means that Songs transferred are properly coded so that all due
payments are received and Sacem can immediately focus on maximising
collections for Hipgnosis Songs Fund.
We will continue to consider Catalogues for reversion to HSG,
Sacem and peermusic as existing administration agreements expire.
Alongside these, we continue to have a significant administration
business with Kobalt as well as with Sony Music Publishing, Warner
Chappell Music and Universal Music Publishing.
Driving consumption through Synch
The Company's Portfolio of iconic and culturally important Songs
are naturally in high and constant demand from producers to feature
in their movies, TV shows, advertisements, video games and online
marketing.
Our global in-house '24/7' Synch licensing operation actively
manages our Songs with responsibility. The Hipgnosis Song
Management team focuses on creating opportunities which add value
to both the Song and the Songwriter's legacy, while also responding
to incoming enquiries within a matter of minutes.
The success of our approach is demonstrated by the 24.7%
year-on-year increase in synch PFAR income in calendar 2022
compared to 2021.
Another highlight of the year was our placement of All The Small
Things, co-written by Tom Delonge, whose Catalogue the Company
bought in December 2019, as the sound track for the highly coveted
John Lewis 2022 Christmas Advert. The original Blink-182 version of
the Song reached Number six in the Billboard Hot 100 and Number two
in the UK on release in 2000. Our Synch team saw the potential of a
slowed down version of this track and presented it to John Lewis,
who chose it to soundtrack their seasonal Christmas advert.
Following the John Lewis advert, and the Blink-182 reunion world
tour announced in October 2022, streaming consumption has notably
increased, particularly in the UK. In addition, there have been
several interpolations and samples agreed. These, in turn, will
drive further consumption when they are released as well as create
new IP and revenue streams.
Alongside the John Lewis Christmas advert as one of the most
prestigious placements for Synchs, stands the Superbowl half time
show. This year, Rihanna performed four of the Company's co-owned
Songs during her set: Birthday Cake (The-Dream), All Of The Lights
(Jeff Bhasker/The-Dream), Run This Town (Jeff Bhasker/No I.D.) and
Umbrella (The-Dream/Tricky Stewart). Close to 119 million viewers
tuned in for her performance on television and streaming services,
with each of the Songs recording gains on streaming platforms of up
to 280% in the week following her performance. Four months on,
Umbrella's US weekly Streaming-on-Demand figures are still 1.3
times that pre the Superbowl; Run This Town is showing 1.5x the
demand.
During the year, our Synch team enhanced their Publishing
Partner engagement program in order to further increase the access
to and visibility of our Songs. This proactive approach aims to
encourage greater collaboration with our publishing partners with
the aim to maximise synch activity. In addition, we create bespoke
approval processes, ensuring that we remain a low friction partner
for quickly licensing repertoire.
In addition, the Synch team has taken advantage of a number of
technology solutions that trawl the global entertainment industry
and automatically alert the team every time a significant synch
deal goes on air. Combining this technological approach with our
proprietary in-house synch and royalties databases enables us to
have an integrated system where a synch can be followed from its
pitching stage, through its usage and ultimately its
collection.
Bringing Songs to new audiences
Putting the spotlight on creating interpolations of our Songs,
having our Songs sampled and nurturing cover versions of our Songs
results in new IP for the Company as well as new and enhanced
revenue streams.
This year, Nicki Minaj delivered another enormous global hit
based on Rick James's hit Super Freak. Nicki's Song Super Freaky
Girl went to Number 1 on the Billboard Hot 100 in the US as well as
being a top five hit in the UK. The original Song was released in
1981 and has been a seminal Song ever since. In 1990, it was
interpolated as U Can't Touch This by MC Hammer for the enormous
global Grammy award winning hit. All three Songs have pride of
place in the Company's portfolio and Nicki Minaj's recording is not
only the highest charting, having reached Number 1, but also, once
again, helps to revive both the original and the MC Hammer version.
As a result of all this activity we have already seen a 45% uplift
year-on-year for the combined earnings of Super Freak and Super
Freaky Girl, when comparing the first nine months of 2022 to the
first nine months of 2021.
The three versions have more than 5 billion streams across all
services with approximately half of them under the Company's
ownership. Super Freaky Girl has also been awarded an ASCAP POP
Award as one of the most played songs on US radio in the past 12
months. Through ownership of the Rick James Catalogue, the Company
receives its 50% share of Rick James' 55% of the publishing share
of Super Freaky Girl.
In addition, we continue to focus on creating new master
recordings of selected Songs within the Catalogue designed to be
attractive for synch opportunities.
This approach has already proved successful, with a new version
of Bon Jovi's Wanted Dead Or Alive. We partnered with Empara Mi and
created a new recording of this Song, specifically designed for the
current trend in movie and video game trailers of atmospheric,
ethereal recreations of iconic songs. In this case, the Company
owns 50% of the Publishing copyright via the Richie Sambora
Catalogue acquisition and 100% of the master recording of the new
version. We placed the Song for the trailer of the forthcoming
video game Transformers: Reactivate - earning a six-figure synch
fee. In addition, we released the Song on Streaming services to
establish a base for the record where it has achieved over 1.6
million streams on Spotify alone, and should continue to grow and
generate further income once the game is released. The trailer has
already been viewed 2 million times on YouTube.
Another example is when we placed Richie Sambora as a contestant
on the UK version of The Masked Singer. Four of the six songs that
he performed on the series were from the Company's Portfolio. When
he was revealed in the semi-final, his profile reached a recent
all-time high and there was an increased streaming consumption of
the Bon Jovi songs held by the Company.
Another initiative aimed at introducing our iconic songs to a
new generation of fans in order to drive increased streaming
consumption is making Nile Rodgers the face of Chanel Eyewear as
well as the first and only "Artist In Residence" at Apple Music. We
have also presented CHIC's first five albums and Sister Sledge's We
Are Family in Spatial Audio on the service, as well as securing a
significant six figure synch for the song Spacer with Renault in
Europe.
Progress made towards ensuring that Songwriters are fairly
remunerated
The 2022-23 financial year saw significant progress in our
campaign for Songwriters to be more fairly rewarded for their
contribution to the success of the music industry. Without
Songwriters there is no music industry and all Songwriters deserve
to go from the bottom of the economic equation to the top. It
cannot be said often enough that where the Company has purchased a
Catalogue we stand in the shoes of the Songwriter, so our
Shareholders' interests are entirely aligned with those of
Songwriters. If we can get Songwriters paid more, our Shareholders
benefit equally.
We advocated for, and welcome moves by the US Copyright Royalty
Board (CRB) which, during the year, disallowed an appeal from
certain streaming services against their CRB III ruling as well as
the joint industry proposal approved by the CRB which provides for
further increases during the CRB IV period.
CRB III provided for a 44% increase in the headline rate of
Digital Service Providers (DSP) revenues paid to Songwriters and
Publishers, reaching 15.1% in 2022. As a result of the appeal by
certain streaming services, some revenues were not paid
contemporaneously. Following the rejection of the appeal the music
industry and the Mechanical Licencing Collective (MLC) has started
the process to distribute those revenues. We have accrued a total
of $16.1 million for the CRB III retroactive revenue and a further
$5.6 million for CRB III uplift during the financial year.
The joint industry proposals - which have been confirmed, for
CRB IV saw the proportion of DSP revenue paid to Songwriters
further rise incrementally to 15.35% in 2027, as well as the
royalty payable on a physical sale or download rising from 9.1
cents to 12 cents with additional inflationary increases. Whilst
there is still a long way to go before Songwriters are fairly
remunerated, these are important steps in the right direction.
The joint CRB IV proposals show there is increasing acceptance
across the music industry that Songwriters should be fairly
rewarded for their work. Although the increase is more modest than
the CRB III rises, we support it as it will provide a background of
stability at the highest streaming rates ever paid in the context
of which we can continue our advocacy efforts.
In the UK, the Competition and Markets Authority (CMA) concluded
their market study and recommended that the Intellectual Property
Office (IPO) take forward a number of workstreams. After the year
end, the IPO announced an agreement on how the music industry and
the Government will work together to deliver consistent
high-quality metadata and the Government has announced a joint
industry working party on music industry remuneration. We welcome
these steps, however, we believe that far greater reform is needed
and we continue to engage with the relevant organisations to
achieve this change. Our ultimate goal is for Songwriters' pay to
be determined by the free market, not legislation.
We also supported BMI in its Live Concert rate victory, which
set a new rate 138% higher than the previous one, reflecting the
importance of Songs in the live concert experience. As we've stated
before, live concerts would not exist without Songs.
Hipgnosis Songs Group (HSG) and new Songs
Prior to being acquired by the Company in September 2020, HSG
had two main divisions: Song Creation, which accounted for 78% of
revenues at the time, and third-party administration which
accounted for 22% of revenues.
The chief purpose of acquiring HSG was the ability to
self-administer our acquired Catalogues in the US. This would
reduce third party administration costs, allow us to collect
revenue quicker, reduce revenue leakage, give us greater visibility
over revenue and give us a seat at the table to negotiate better
rates for our Catalogue, as well as advocate on behalf of
Songwriters. It was an established platform at acquisition and in
the intervening time we have improved its capabilities as we have
shifted its focus to administration. In total, the Company has
reverted 43 Catalogues to HSG, enabling the Company to benefit from
this in-house capability.
In addition to administering Songs in-house for the Company, HSG
continues as a third-party administrator. In this capacity, HSG
administers Catalogues such as Beggars Banquet, which includes
Glass Animals, who claimed the longest run in Billboard 100 history
with Heat Waves. The Song has gone 5x Platinum in the US, was the
second most streamed Song in 2022 in the US and is ranked among the
Top 15 "most streamed Songs of all-time on Spotify".
Song Creation remains a small part of Hipgnosis Songs Fund's
overall business, at less than 2% of net revenue. Highlights from
the period include continued important placements by Stefan and
Jordan Johnson (the Monsters & Strangerz) with Selena Gomez;
the Jonas Brothers and Miley Cyrus; as well as Julian Bunetta and
John Ryan with Katy Perry, Shawn Mendes and Sabrina Carpenter. The
expansion of our joint ventures with NO I.D., including key
signings with both Saba and Sonny Nitez, as well as Hippo Campus
are also expected to deliver hit songs.
During the period, the Company has evolved HSG's Song Creation
business and in addition to delivering original hits, its roster of
Songwriters are also focused on interpolating the Company's iconic
Songs into new hits. This focused strategy will enable more stable
returns off a reduced fixed cost base. As a result, there was a
restructuring of the team, with a $1 million one-time cost which is
expected to deliver an estimated annual fixed cost savings of $0.8
million.
Following the successful implementation of our strategy to use
HSG for self-administration and the subsequent growth in third
party administration, this business is well balanced and gross
revenues are now split evenly across fund administration, third
party administration and Song Creation.
Recognition through awards
Grammys
The Company's Songwriters were included in 16 Grammy nominations
for 2022 and won the following:
-- Best Dance/Electronic Album: Beyonce's RENAISSANCE co-written
by Travis Garland and Diplo's Diplo, co-written by Phil Scully and
David Karbal.
-- Best Folk Album: Revealer by Madison Cunningham co-written by
Dan Wilson
-- Producer Of The Year (Non Classical): Jack Antonoff
PRO Performance Awards
-- Song of the Year SESAC Music Awards 2022: Heatwaves, by Glass
Animals, written by Dave Bayley
-- Winners at the ASCAP Pop Awards 2023:
-- Ghost by Justin Bieber, co-written by Stefan Johnson and
Jordan Johnson
-- Super Freaky Girl by Nicki Minaj, co-written by Rick
James
-- ASCAP Most Performed Songs of the Year:
Just About Over You performed by Priscilla Block and co-written
by Emily Kroll
-- ASCAP Country Awards 2022:
Just About Over You performed by Priscilla Block and written by
Emily Kroll
-- BMI Most Performed Songs of The Year:
-- It's Cause I Am performed by Callista Clark and
co-written by Cameron Jaymes
-- Baila Conmigo performed by Selena Gomez and Rauw Alejandro
written by Albert Hype
-- Winner in the BMI Pop Awards 2023 for most performed Song:
Ghost by Justin Bieber, co-written by Stefan Johnson
-- Winner in the BMI Country Awards 2022: Tequila Little Time by
Jon Pardi, written by Rhett Akins
-- Winner in the BMI Latin Awards 2022: Telepatia by Kali Uchis,
co-written by Albert Hype
Upgraded capabilities
The strategic investment by Blackstone LLP into Hipgnosis Song
Management during 2021 has enabled us to continue investing in
capabilities and expertise despite the reduction in the management
fee received from the Company as a result of the decline in the
share price.
Notably, Ben Katovsky joined on 1 October 2022 as our new
President and Chief Operating Officer. Ben, who has almost two
decades' experience in the music industry, most recently as COO at
BMG, leads the operations of Hipgnosis Song Management. He has
particular expertise in the scaling of music companies, building
value from growing Catalogues, digital business development and
using technology and data to enable this.
Ben's appointment was part of our on-going commitment to ensure
that we continue to evolve with the right people in the right roles
to maximise opportunities and value for the Company. As such we
have made a number of additional appointments, most notably in our
Song Management organization to focus on further driving audience
development and licence revenue for our Songs.
Danny Bennett has been appointed EVP responsible for Marketing
and Audience Development. Danny has been a leading manager in the
music industry for more than 30 years. He's widely respected for
using his progressive marketing skills. He famously redefined the
career of his father, Tony Bennett, including through iconic
collaborations with Lady Gaga and Amy Winehouse. Based in New York,
Danny will support an increased focus on the United States, the
largest music market.
Patrick Joest has been promoted to Head of Synch leading the
IA's global synch marketing and licensing operation. Patrick has
over two decades' global experience and a network in Film &
TV/synch licensing on both the supervision and rights owners' side.
Prior to Hipgnosis, Patrick spent 11 years at BMG, where he built
the global synch business from scratch to a multi-million dollar
operation, leading a team across 15 offices.
Sara Lord has been appointed EVP Content Creation. Sara is an
entertainment industry executive with over 25 years of experience
in the music, film and advertising industries. Sara joined from
Concord Music, where she had been SVP International Synch and
Project Development. Sara is leading Hipgnosis' collaborative work
with companies looking to create audio-visual, theatrical,
non-traditional physical and experiential content showcasing
Hipgnosis catalogues.
As part of the ongoing investment and expansion of the
Investment Adviser, additional appointments are underway including
the appointment of an in-house General Council to be announced in
due course.
Last September, we said goodbye to Amy Thomson and we will
shortly be saying goodbye to Ted Cockle. We would like to thank
both of them for their efforts and wish them all the best for the
future.
During the year a particular operational focus for the
Investment Adviser has been the build out of its proprietary
technology and data platform, the implementation of work processes
associated with this platform and the population of data into new
systems. The platform now includes systems that enable rights
administration, Synch sales, audience development and royalty
collection and assurance and is therefore designed to optimise the
end-to-end value creation process.
Significant investment has been made into the development of a
proprietary cloud-based royalty platform. This platform enables the
Investment Adviser to ingest and verify royalty statements received
from publishers, labels, CMOs and other sources rapidly and to a
high level of granularity. The platform will allow significantly
improved royalty analysis and verification and will power improved
insights to drive catalogue revenue generation. We see technology
and data science as a key priority and will continue to invest
significantly in these areas.
Financial Review
NAV
The Company reports two net asset values: an IFRS NAV which is
prepared in accordance with IFRS, under which the Company's
investments in Catalogues are held at cost less amortisation and
impairment, and an Operative NAV which adjusts the IFRS NAV to
reflect the Fair Value of the Company's Catalogues, as determined
by the Portfolio Independent Valuer. The IFRS Net Asset Value (NAV)
per share as at 31 March 2023 was $1.1863 which is a 9.2% decrease
from $1.3065 as at 31 March 2022, reflecting the amortisation of
the Company's Catalogues in accordance with applicable accounting
protocols and ignoring their current fair value.
The Board and the Investment Adviser consider that the most
relevant NAV for Shareholders is the Operative NAV.
The Operative NAV per share increased by 3.58% to $1.9153 during
the year (31 March 2022: $1.8491), driven primarily by a 4.0%
increase in the Fair Value of the Portfolio. This, together with
the dividends, of 21.6p (27.9c), takes Total $ NAV Return to
Shareholders to 69% since the IPO on 11 July 2018.
Operative NAV per share Bridge
From 1 April 2022 to 31 March 2023
$
---------------------------- --------
Opening Operative NAV per
share 1.8491
Loss for the year (0.0741)
Amortisation and Impairment
during the year 0.0955
Dividends paid during the
year (0.0465)
Repurchase of shares into
treasury 0.0013
Increase in Fair Value of
Catalogues 0.0900
---------------------------- --------
Closing Operative NAV per
share 1.9153
---------------------------- --------
Based on the Sterling to Dollar exchange rate at 31 March 2023
of 1.236, the Operative NAV per share presented in Sterling is
154.91p per share (31 March 2022: 140.79p based on Sterling to
Dollar exchange rate of 1.3134). As at 11 July 2023, the Operative
NAV per share presented in Sterling would be 148.51p per Share
(GBP: USD 1.2897).
Fair Value of the Portfolio
The Fair Value of the Portfolio increased by 4.0% to $2.80
billion (31 March 2022: $2.69 billion), mainly as a result of
royalty statements received exceeding expectations, especially
related to performance income and streaming income from older
vintage catalogues. This also drove the increase in the Operative
NAV in Dollar terms over the period.
The Fair Value is determined by the Portfolio Independent
Valuer, Citrin Cooperman, whose valuation approach is described in
detail further on in this report.
In advance of the last Interim Report published in December
2022, Kroll Advisory Limited ("Kroll"), an independent valuation
firm, was appointed to consider and advise on the reasonableness of
certain assumptions commonly employed in the valuation of music
catalogues based on data provided by the Company.
The Board continues to engage and consult with Kroll in order to
obtain a range of views with respect to the development of inputs
that impact the Group's valuation methodology, as applied by the
Portfolio Independent Valuer. Details of this are discussed in the
Chair's Statement.
Tax considerations
The Company is a UK tax resident with Investment Trust Company
(ITC) status. For UK corporation tax purposes, the Group's music
assets are considered intangible fixed assets and therefore the
Company may be unable to benefit from an exemption for tax on
chargeable gains due to its ITC status on any potential sale of
Catalogues.
Given the options the Board is considering, the current share
price and the upcoming Continuation Vote, the Company has estimated
that in the event that the Group sells all of its assets, that the
Group's potential tax charge on these disposals, based on certain
assumptions, could be approximately $245 million.
This potential tax charge reflects both the impact of the
historic amortisation of such assets, where the Group has already
received a tax benefit to the extent available in each year of
ownership and the uplift in value since purchase. This estimate
does not include any assumptions as to the structure of any
disposal, the utilisation of any brought forward tax losses
potentially available to the Group or from any potential
opportunities to optimise the structure of any sale of assets,
which could both result in a materially lower tax charge on any
future sale of the Group's assets.
Revenue
Both in the current and prior period, the Company recognised a
number of non-recurring elements impacting IFRS revenue, resulting
in Total revenue and Net revenue decreasing to $177.3 million (31
March 2022: $200.4 million) and $147.2 million (31 March 2022:
$168.3 million) respectively. As can be seen below, the decrease in
Net revenue was primarily the result of the initial recognition of
the Usage Accrual in the prior period ($36.0 million) as well as
the non-recurring element of RTI ($14.1 million) in the prior
period, partly offset by the CRB III retroactive accrual ($16.1
million) in the current year.
The CRB III retroactive accrual was made in the first half of
the year following the confirmation of the CRB III rate increase to
15.1% for the Songwriters' mechanical portion of US Streaming
income by 2023. The accrual estimates the retroactive payment due
to the Company as a result of revenues in previous accounting
periods not having been recognised at the full CRB III rates.
Excluding these non-recurring elements, the Company saw an
increase in IFRS Net revenues of $12.9 million or 10.9%
year-on-year. This is as a result of an increase in royalty
statements and accruals of $2.4 million, a movement of $6.2 million
related to the Usage Accrual,
a $5.6 million accrual reflecting the revenue attributable to
Hipgnosis in the current year due to the CRB III ruling, an
increase in royalty costs of $1.5 million and an increase in
interest income of $0.2 million.
Pro Forma Annual Revenue (PFAR)
Given the multiple non-recurring elements captured with the IFRS
revenue line, to provide Shareholders with an understanding of the
like-for-like performance of the Company's revenues, by removing
the impact of new Catalogue acquisitions and these non-recurring
elements, the Company presents the Pro Forma Annual Revenue (PFAR)
performance measure. This shows the royalty revenue earned by
Catalogues in a calendar year largely based on royalty statements
received, irrespective of whether the Songs were owned by the
Company over the period analysed and does not include any revenue
accruals under IFRS. Although not directly reconcilable with IFRS
revenue, the Company believes this provides a relevant
like-for-like full year income comparison of the Group's Catalogues
of Songs held as at the period end.
PFAR is reported for both the <10 year vintage, i.e. those
newer Catalogues where there is typically an expectation of some
natural decay (or loss of revenues) over time, and for the >10
year vintage, i.e. those Catalogues which have reached the end of
their natural decay curve.
The table below shows PFAR for Catalogues owned as at 31 March
2023 over time.
Pro Forma Annual Revenue for Catalogues owned
12 months 12 months* 12 months* 12 months
to Dec to Jun
22 21
$m to Jun to Dec $m
22 21
$m $m
---------------- --------- ---------- ---------- ---------
Total PFAR
for Catalogues
owned as at
31 March 2023 130.2 122.2 116.2 115.9
Vintage <10
years 56.5 52.6 50.0 51.0
Vintage >10
years 73.7 69.6 66.2 64.9
---------------- --------- ---------- ---------- ---------
* Restated. Note: Age of a Catalogue is calculated as the
average release year of a Catalogue as at 1 January 2023 weighted
on earnings, at time of acquisition. For the avoidance of doubt,
the >10 years now includes some Catalogues that previously were
considered in <10 years
PFAR for the 12 months to December 2022 increased by 12.1%
year-on-year to $130.2 million, a significant acceleration on
growth seen in previous years. PFAR grew strongly in both
categories: by 13.0% year-on-year in the <10 year to $56.5
million (2021: $50.0 million) and 11.3% year-on-year in the >10
year vintage to $73.7 million (2021: $66.2 million). Previously,
the Company has highlighted the stabilisation of the <10 year
vintage PFAR. The significant growth now being seen in this
category highlights that those Catalogues continue to approach the
end of their decay curve and any remaining decay within certain
income streams is being significantly outpaced by growth.
PFAR does not include any income due to the Company as a result
of the increased royalty rates due from CRB III ($5.6 million in
the financial year) or income from Hipgnosis Songs Group LLC (HSG)
($5.1 million in the financial year).
PFAR is set out by income type for calendar year 2022 against
the comparative previous calendar year below.
2022 vs 2021 PFAR split by income type
12 months
12 months to
to Dec Dec
22 21
Change
$m $m %
------------------------ --------- --------- ------
Streaming 52.11 45.40 +14.8
Synchronisation 19.44 15.59 +24.7
Performance 30.81 28.27 +9.0
Mechanical 4.87 5.01 -2.8
Digital Downloads 2.50 3.59 -30.4
Settlement and Other 3.88 2.20 +76.4
------------------------ --------- --------- ------
Total Publishing Income 113.61 100.06 +13.5
Masters* 16.63 16.10 +3.3
------------------------ --------- --------- ------
Total PFAR 130.23 116.16 +12.1
------------------------ --------- --------- ------
*Masters income includes Artist Royalties, Producer Royalties
and Neighbouring Rights.
Streaming income continues to grow strongly, up 14.8%
year-on-year and represented 40.0% of the Portfolio's PFAR income
for the 12 months to December 2022 (2021: 39.1%). This validates
how the Company's strategy of acquiring Catalogues with high levels
of streaming consumption benefits from the structural growth in
global paid-for streaming.
Synchronisation income, which includes both fees for the use of
Songs on traditional media outlets as well as digital licences for
social media, gaming and fitness platforms, grew by 24.7%
year-on-year. This reflects the Investment Adviser's focus on
maximising revenue through pitching, promoting and procuring synch
deals. In addition, the Company is starting to receive income from
digital licences.
As anticipated in the Interim Report, the Company received
increased performance income in the second half of the year as
recovery from Covid-19 restriction related declines worked its way
through the music industry payment cycle. This, together with
successful tours from the Red Hot Chili Peppers, Nile Rodgers &
CHIC, Journey and Blondie, amongst many others, resulted in
performance income increasing by 9.0% year-on-year to $30.8
million, with the second half up 41% on H1 2022. With all markets
now fully open and major concert tours for all four of the
previously mentioned artists taking place this year, we anticipate
that performance income will continue to recover. Additionally,
Blink-182 are touring and both Beyoncé and Taylor Swift are
performing to sell-out stadiums with their shows featuring a number
of songs in which Hipgnosis Songs Fund has an interest.
Masters income, which includes income from Artist Royalties,
Producer Royalties and Neighbouring Rights, increased by 3.3%
year-on-year, from $16.1 million to $16.6 million. This growth was
subdued as a result of a relatively high proportion of younger
catalogues within this income stream continuing to experience some
natural decay.
The Company considers that the PFAR metric will remain a
relevant measure of underlying Portfolio performance for
Shareholders until IFRS revenue reaches a 'steady state' and
becomes a comparable measure useful for the Board and
Shareholders.
Costs
Adjusted operating costs, which exclude interest costs and
Catalogue performance bonuses decreased by 21.2% year-on-year to
$29.5 million (31 March 2022: $37.5 million). This is driven by a
reduction in Advisory fees as a function of the Company's lower
share price during the year, reduced administration, legal and
professional fees as well as lower aborted deal costs.
As a result, Ongoing Charges as a percentage of the average
Operative NAV decreased to 1.21% for the year ended 31 March 2023
(31 March 2022: 1.54%).
Whilst a significant Catalogue bonus provision is recognised in
the current year, we do not anticipate this provision to occur at a
material level in future years.
Given continuing outperformance on certain Catalogues, the
Company has recognised an additional Catalogue performance bonus
provision of $43.8 million (31 March 2022: $0.9 million). These
relate to payments to Songwriters where the recognition of a
performance bonus is contingent on certain performance hurdles
defined in the catalogue acquisition agreements, based on actual
and expected future performance that is highly probable.
Overall operating expenses have increased by 26.4% year-on-year
to $233.9 million (31 March 2022: $185.0 million) due to increased
interest costs, as detailed below, and the increase in Catalogue
bonus provisions, discussed above.
EBITDA
EBITDA for the year ended 31 March 2023 decreased by 10.1%
year-on-year to $117.7 million (31 March 2022: $130.9 million),
reflecting the reduction in net revenue only partly offset by a
reduction in the Advisory fees.
Cash flow and net debt
Net debt decreased to $562.0 million at 31 March 2023 (31 March
2022: $569.9 million) assisted by strong cash receipts from royalty
statements and the change of dividend timetable, which meant only
three dividends were paid out during the period.
Net cash generated from operating activities increased to $102.1
million (31 March 2022: $84.9 million).
In addition to the reduction in net debt, due to the increase in
the Operative NAV, net debt as a percentage of Operative NAV has
decreased to 24.3% as at 31 March 2023 (31 March 2022: 25.4%).
Leverage
For the period 1 April 2022 to 29 September 2022 the Company had
a Revolving Credit Facility, led by J.P. Morgan (the "J.P. Morgan
RCF"), which was exposed to London Inter Bank Overnight Rate
(LIBOR) with a margin of 3.25%.
On 30 September 2022 the Company entered into a new RCF (the
"New RCF") with a commitment of $700 million which runs for five
years until 30 September 2027. The New RCF, arranged by CNB, bears
interest at a floating rate of interest based on the Secured
Overnight Financing Rate (SOFR), plus an initial fixed margin of
2%. Not only do the terms of the New RCF carry a lower margin cost,
there is also greater operational flexibility within the
facility.
In order to mitigate interest rate risk and provide certainty
over interest payments, the Company completed interest rate swap
agreements. From 30 September 2022 until 2 January 2023, the
interest on all the drawn debt was fixed at 5.71% (including debt
margin).
Since 3 January 2023, $340 million has been hedged for the
duration of the RCF (until 30 September 2027) at a fixed rate of
5.67% (including debt margin); a further $200 million is hedged
until 3 January 2026 at a fixed rate of 5.89% (including debt
margin). The balance remains unhedged to provide flexibility.
In total, the Company completed interest rate swap agreements to
hedge a total of $540 million at a blended rate of 5.75%, including
debt margin, for a weighted average life of 4.26 years, starting
from 3 January 2023.
These interest rate hedging contracts are not subject to margin
calls in the event of movements in underlying interest rates.
Loan interest expense increased to $33.7 million (31 March 2022:
$20.4 million) due to the rise in LIBOR related to the J.P. Morgan
RCF which was in place until 29 September 2022.
On derecognition of the pre-existing J.P. Morgan RCF, $5.0
million was recognised as a borrowing cost extinguishment charge
and represents the unamortised capitalised borrowing costs on the
J.P. Morgan RCF.
Post year end, there was a cash benefit of $1.2 million received
relating to the short-term fair value gain on the prior quarter's
interest rate swap due to underlying rates being favourable for
that period. As at 31 March 2023, the fair value of the Held for
Trading financial liability was $3.4 million.
Foreign Exchange Hedge
On 12 October 2022, the Company entered into a series of US
Dollar to Sterling foreign exchange forward contracts to limit its
exposure to foreign exchange rate risk and to provide certainty on
the US Dollar value of future Sterling dividend payments. This
rolling hedging strategy implemented by the Board ensures there are
GBP50 million of forward contracts in place at any time. The
foreign exchange forward contracts were in place until April 2024
and have subsequently been extended to October 2024.
As at 31 March 2023, the Held for Trading financial asset
relating to the foreign exchange forward contract is $4.9 million
and a fair value gain of $6.0 million is recognised in the
Consolidated Statement of Profit and Loss.
Dividends
Dividends paid in the year of $56.3 million related to the
periods ending March 2022 (paid 15 June 2022), June 2022 (paid 28
October 2022) and September 2022 (paid 31 January 2023). An interim
dividend for the period ending December 2022 was declared on 16
March 2023 and paid post year end on 28 April 2023. The fourth
interim dividend in relation to the March 2023 financial year of
1.3125p was declared on 23 June 2023 with a payment date of 28 July
2023.
All dividends were in line with the Company's annual target of
5.25p in interim dividends per Ordinary Share.
Dividends paid, of which there were three in the year of $56.3
million were covered 1.44x by Distributable Revenues recognised
during the year. Dividends declared, of which there were four in
the year, amount to $75.9 million, which were covered 1.07x by
Distributable Revenues recognised during the year.
In addition, the Company was covered 1.45x on a Leveraged Free
Cashflow measure, necessary to meet the three dividend payments
paid in the year, and 1.08x the Leveraged Free Cashflow necessary
to meet the four dividends declared in the year.
EPS
EPS for the year ended 31 March 2023 is (7.41c) (31 March 2022:
(1.65c)); the reduction to EPS is set out in the below table:
EPS Bridge Cents
--------------------------------- ------
Opening EPS at 1 April 2022 (1.65)
Reduction in Net Revenue (1.74)
Reduction in Operating Expenses
(excluding the below) 0.36
1. Reduction in Advisory and
Performance Fee 0.34
2. Increase in Catalogue bonus
Provision (3.62)
3. Increase in Interest Expenses (1.10)
--------------------------------- ------
Closing EPS at 31 March 2023 (7.41)
--------------------------------- ------
As set out previously, the reduction in Total Revenue is
primarily due to the result of the recognition of both the Usage
Accrual ($36.0 million) and the non-recurring RTI ($14.1 million)
in the prior year, partly offset by the CRB III retroactive accrual
($16.1 million) in the current year.
Adjusted EPS, as defined within the Alternative Performance
Measures, which primarily removes the impact of Catalogue
amortisation and other non-operating costs is 4.12 cents (31 March
2022: 7.18 cents). Catalogue bonus provision has been included in
the calculation in the current year as the Company does not
anticipate this provision to occur at a material level in future
years. The Group amortises Catalogues over a useful life, using a
straight-line method of 20 years, which is in line with the
industry standard.
Accruals and Receivables
Royalty receivables at 31 March 2023 were $7.1 million (31 March
2022: $6.6 million), representing royalty statements received by
March 2023 with payment received subsequent to year end.
Accrued income as at 31 March 2023 was $126.2 million on a gross
basis (31 March 2022: $105.3 million) primarily due to the
recognition of a CRB III accrual. When removing the accruals
relating to the time lag in royalty reporting, CRB III and Usage
accrual, the underlying accrual has reduced by $7.4 million to
$47.2 million (31 March 2022: $54.6 million) which reflects the
efforts of the Investment Adviser to reduce the working capital
cycle to ensure all prior period revenue has been received.
A breakdown of these accruals is set out below:
-- $47.2 million for earnings where, due to the time lag in
royalty reporting, statements are not expected to be received until
calendar Q2 2023 onwards (31 March 2022: $54.6 million);
-- $7.8 million income accrual relating to time-lagged
international reporting on PRO earnings. International PRO
reporting has a significant time lag due to the additional
collection time taken for PROs to distribute income from
territories. The lag is due to the nature of processing royalties
locally, then distributing them to the domestic PRO, which will in
turn process and distribute these royalties to the Group. Six
months of international PRO earnings are accrued, although PRO
processing delays can typically result in an earnings lag of up to
24 months (31 March 2022:
$7.3 million);
-- $21.7 million CRB III accruals (31 March 2022: $Nil). This is
as a result of the confirmation of the CRB III rate increases in
July 2022 for the Songwriters' mechanical portion of US Streaming
income. Of this, $5.6 million is the impact of the higher 15.1%
rate on the revenue earned by the Company during the year and
$16.1 million has been recognised as an estimate of the
retroactive payment due as a result of revenues historically not
having been recognised at the full
CRB III rates;
-- $42.2 million Usage Accrual, which recognises revenues that
have triggered a contractual payment but have not been paid to, or
processed by, collection societies, publishers and
administrators
(31 March 2022: $36.0 million); and
-- $7.3 million HSG gross revenue accrual, (31 March 2022: $7.4
million).
Merck Mercuriadis
Founder, Hipgnosis Songs Fund Ltd and
Founder/CEO, Hipgnosis Song Management Ltd.
12 July 2023
Consolidated Statement of Profit and Loss
For the year ended 31 March 2023
1 April 2022
to
1 April 2021
31 March to 31 March
2023 2022
Notes $'000 $'000
----------------------------------------------- ----- ------------ ------------
Income
Total revenue 13 177,312 200,384
Interest income 237 5
Royalty costs (30,316) (32,041)
----------------------------------------------- ----- ------------ ------------
Net revenue 147,233 168,348
----------------------------------------------- ----- ------------ ------------
Expenses
Advisory and performance fees 19 (12,472) (16,548)
Administration fees (608) (1,152)
Legal and professional fees (3,794) (5,999)
Audit fees 21 (753) (600)
Brokers' fees (554) (274)
Directors' remuneration 18 (643) (696)
Listing fees (84) (34)
Subscriptions and licences (607) (526)
Public relations fees (780) (702)
Catalogue bonus provision 10 (43,757) (936)
Movement in ECL provision for HSG advances (2,196) (1,570)
Other operating expenses 14 (10,354) (10,105)
Amortisation of Catalogues of Songs 6 (111,583) (105,787)
Impairment of Catalogues of Songs 6 (3,901) (1,490)
Amortisation of borrowing expenses (1,618) (1,635)
Borrowing cost extinguishment 9 (5,007) -
Fixed asset depreciation (653) (712)
Loan interest 9 (33,700) (20,377)
Fair value gain on held for trading derivative
financial instruments 22 2,622 -
Finance charges for deferred consideration - (212)
Net loss from joint ventures (264) (836)
Foreign exchange losses 15 (3,157) (14,857)
----------------------------------------------- ----- ------------ ------------
Operating expenses (233,863) (185,048)
----------------------------------------------- ----- ------------ ------------
Operating loss for the year before taxation (86,630) (16,700)
Taxation 5 (3,008) (2,743)
Loss for the year after tax (89,638) (19,443)
----------------------------------------------- ----- ------------ ------------
Basic Earnings per Share (cents) 20 (7.41) (1.65)
Diluted Earnings per Share (cents) 20 (7.41) (1.65)
----------------------------------------------- ----- ------------ ------------
All activities derive from continuing operations.
The accompanying notes form an integral part of these
Consolidated Financial Statements.
Consolidated Statement of Comprehensive Income
For the year ended 31 March 2023
1 April 2022
to
1 April 2021
31 March to 31 March
2023 2022
Notes $'000 $'000
----------------------------------------- ------ ------------ ------------
Loss for the year after tax (89,638) (19,443)
Other comprehensive income:
Movement in foreign currency translation
reserve (6) (1,816)
------------------------------------------------- ------------ ------------
(6) (1,816)
------------------------------------------------ ------------ ------------
Total comprehensive loss for the year (89,644) (21,259)
------------------------------------------------- ------------ ------------
The accompanying notes form an integral part of these
Consolidated Financial Statements.
Consolidated Statement of Financial Position
As at 31 March 2023
31 March 31 March
2023 2022
Notes $'000 $'000
------------------------------------------------ ----- ------------- -------------
Assets
Catalogues of Songs 6 1,921,248 2,036,732
Other assets 917 568
Goodwill 3 272 272
Non-current receivables 8 13,210 640
------------------------------------------------ ----- ------------- -------------
Non-current assets 1,935,647 2,038,212
Trade and other receivables 8 139,999 144,450
Held for trading derivative financial asset 22 4,914 -
Cash and cash equivalents 7 37,965 30,067
------------------------------------------------ ----- ------------- -------------
Current assets 182,878 174,517
------------------------------------------------ ----- ------------- -------------
Total assets 2,118,525 2,212,729
------------------------------------------------ ----- ------------- -------------
Liabilities
Loans and borrowings 9 594,428 593,992
Catalogue bonus provision 10 33,080 925
------------------------------------------------ ----- ------------- -------------
Non-current liabilities 627,508 594,917
Held for trading derivative financial liability 22 3,395 -
Other payables and accrued expenses 10 53,088 35,413
------------------------------------------------ ----- ------------- -------------
Current liabilities 56,483 35,413
------------------------------------------------ ----- ------------- -------------
Total liabilities 683,991 630,330
------------------------------------------------ ----- ------------- -------------
Net assets 1,434,534 1,582,399
------------------------------------------------ ----- ------------- -------------
Equity
Share capital 11 1,692,198 1,692,198
Foreign currency translation reserve (2,241) (2,235)
Treasury share reserve 11 (1,961) -
Retained earnings (253,462) (107,564)
------------------------------------------------ ----- ------------- -------------
Total equity attributable to the owners
of the Company 1,434,534 1,582,399
------------------------------------------------ ----- ------------- -------------
Number of Ordinary Shares in issue at year
end (excluding Treasury Shares) 1,209,214,286 1,211,214,286
------------------------------------------------ ----- ------------- -------------
IFRS Net Asset Value per Ordinary Share
(cents) 12 118.63 130.65
Operative Net Asset Value per Ordinary Share
(cents) 12 191.53 184.91
------------------------------------------------ ----- ------------- -------------
Approved and authorised for issue by the Board of Directors on
12 July 2023 and signed on their behalf by:
Andrew Sutch Chair Andrew Wilkinson Director
The accompanying notes form an integral part of these
Consolidated Financial Statements.
Consolidated Statement of Changes in Equity
For the year ended 31 March 2023
Foreign
currency
Number of Share Other translation Treasury Retained Total
Ordinary capital reserves reserve reserve earnings* equity
Notes Shares $'000 $'000 $'000 $'000 $'000 $'000
--------------------- ----- ------------- --------- --------- ------------ -------- ---------- ---------
As at 1 April
2022 1,211,214,286 1,692,198 - (2,235) - (107,564) 1,582,399
Dividends paid 16 - - - - - (56,260) (56,260)
Repurchase of
ordinary shares
into treasury 11 (2,000,000) - - - (1,961) - (1,961)
Loss for the
year - - - - - (89,638) (89,638)
Foreign currency
translation reserve
movement - - - (6) - - (6)
--------------------- ----- ------------- --------- --------- ------------ -------- ---------- ---------
As at 31 March
2023 1,209,214,286 1,692,198 - (2,241) (1,961) (253,462) 1,434,534
--------------------- ----- ------------- --------- --------- ------------ -------- ---------- ---------
* Distributable Revenues (as defined in the Alternative
Performance Measures) arising during the year were $81.0 million
which, taken together with the $18.7 million of Distributable
Revenue reserves carried forward from the previous financial year
ended 31 March 2022, result in Distributable Revenue Reserves of
$43.4 million as at 31 March 2023.
For the year ended 31 March 2022
Foreign
currency
Number of Share Other translation Treasury Retained Total
Ordinary capital reserves reserve reserve earnings equity
Notes Shares $'000 $'000 $'000 $'000 $'000 $'000
--------------------- ----- ------------- --------- --------- ------------ -------- --------- ---------
As at 1 April
2021 1,073,440,268 1,466,851 234 (419) - (3,821) 1,462,845
Shares issued 11 137,774,018 229,702 (234) - - - 229,468
Share issue costs 11 - (4,355) - - - - (4,355)
Dividends paid 16 - - - - - (84,300) (84,300)
Loss for the
year - - - - - (19,443) (19,443)
Foreign currency
translation reserve
movement - - - (1,816) - - (1,816)
--------------------- ----- ------------- --------- --------- ------------ -------- --------- ---------
As at 31 March
2022 1,211,214,286 1,692,198 - (2,235) - (107,564) 1,582,399
--------------------- ----- ------------- --------- --------- ------------ -------- --------- ---------
The accompanying notes form an integral part of these
Consolidated Financial Statements.
Consolidated Statement of Cash Flows
For the year ended 31 March 2023
31 March 31 March
2023 2022
Notes $'000 $'000
------------------------------------------------- ----- -------- ---------
Cash flows generated from operating activities
Operating loss for the year before taxation (86,630) (16,700)
Adjustments for:
Movement in trade and other receivables (14,018) (37,274)
Movement in other payables and accrued
expenses 3,890 (1,545)
Lease liability interest 369 -
Loan interest 9 33,700 20,377
Movement in ECL provision for HSG advances 2,196 1,570
HSG restructuring provision 1,028 -
Catalogue bonus provision 43,719 -
Depreciation of fixed assets 653 712
Amortisation of Catalogues of Songs and
borrowing costs 113,201 107,422
Impairment of Catalogue of Songs 6 3,901 1,490
Borrowing cost extinguishment 9 5,007 -
Fair value gain on held for trading derivative
financial assets (2,622) -
Foreign exchange losses 15 3,157 14,857
Taxation paid (5,422) (6,040)
------------------------------------------------- ----- -------- ---------
Net cash generated from operating activities 102,129 84,869
------------------------------------------------- ----- -------- ---------
Cash flows used in investing activities
Purchase of Catalogues of Songs - (300,455)
Purchase of other assets (51) (173)
Writer advances paid (4,040) (8,509)
Deferred consideration paid (2,500) -
------------------------------------------------- ----- -------- ---------
Net cash used in investing activities (6,591) (309,137)
------------------------------------------------- ----- -------- ---------
Cash flows generated from financing activities
Proceeds from issue of shares - 229,468
Repurchase of ordinary shares into treasury 11 (1,961) -
Issue costs paid - (4,355)
Dividends paid 16 (56,260) (84,300)
Lease interest paid (592) -
Interest paid (23,433) (20,775)
Borrowing costs 9 (960) (1,274)
Bank loan repaid 9 (7,000) (50,000)
Bank loan drawn down 9 1,771 72,708
------------------------------------------------- ----- -------- ---------
Net cash (used)/generated from financing
activities (88,435) 141,472
------------------------------------------------- ----- -------- ---------
Net movement in cash and cash equivalents 7,103 (82,796)
------------------------------------------------- ----- -------- ---------
Cash and cash equivalents at the start of
the year 30,067 112,635
Effect of foreign exchange rate changes
on cash and cash equivalents 795 228
------------------------------------------------- ----- -------- ---------
Cash and cash equivalents at the end of
the year 37,965 30,067
------------------------------------------------- ----- -------- ---------
The accompanying notes form an integral part of these
Consolidated Financial Statements.
Notes to the Consolidated Financial Statements
For the year ended 31 March 2023
1. General information
Hipgnosis Songs Fund Limited was incorporated and registered in
Guernsey on 8 June 2018 with registered number 65158 and is
governed in accordance with the provisions of the Companies Law.
The registered office address is Floor 2, Trafalgar Court, Les
Banques, St Peter Port, Guernsey, GY1 4LY.
The Company is registered with the Guernsey Financial Services
Commission under the Registered Collective Investment Scheme Rules
2015, and the Protection of Investors (Bailiwick of Guernsey) Law,
2020. The Company is not authorised or regulated by the Financial
Conduct Authority.
The Company's Ordinary Shares were admitted to trading on the
Specialist Fund Segment of the London Stock Exchange on 11 July
2018 and migrated to a Premium Listing on the Main Market of the
London Stock Exchange on 25 September 2019. The Company was added
as a constituent of the FTSE 250 Index effective from after the
market close on 20 March 2020.
The Company makes and manages its investments through its
subsidiaries, which are registered in the UK and US as limited
companies. The Consolidated Financial Statements present the
results of the Group for the year ended 31 March 2023, rounded to
the nearest US Dollar. The Group is principally engaged in
investing in and managing music copyrights and associated musical
intellectual property.
There has been a presentational change in the comparative period
in the Consolidated Statement of Profit and Loss, as set out in
Note 23.
2. Accounting policies
The principal accounting policies applied in the preparation of
these Consolidated Financial Statements are set out below. These
policies have been consistently applied, unless otherwise
stated.
New and amended standards and interpretations applied
On incorporation, the Company adopted all of the IFRS standards
and interpretations that were in effect at that date and are
applicable to the Group. No new standards during the year ended 31
March 2023 had a material impact on the Consolidated Financial
Statements.
Amended standards and interpretations not applied
The following are amended standards and interpretations in issue
effective from years beginning on or after 1 January 2023:
Amended standards and interpretations Effective date
-------------------------------------------------------------------- --------------
IFRS
17 Insurance Contracts 1 January 2023
IAS 1 Presentation of Financial Statements (Amendments regarding
financial statements' on classification of liabilities
and disclosure of accounting policies) 1 January 2023
IAS 8 Accounting Policies, Changes in Accounting Estimates
and Errors (Definition of Accounting Estimates) 1 January 2023
IAS 12 Income Taxes (Deferred Tax related to Assets and Liabilities
arising from a Single Transaction) 1 January 2023
------ ------------------------------------------------------------ --------------
The Group has considered the IFRS standards and interpretations
that have been issued but are not yet effective.
None of these standards or interpretations are likely to have a
material effect on the Group, as it is the belief of the Board that
the activities of the Group are unlikely to be affected by the
changes to these standards, although any disclosures recommended by
these standards, where applicable, will be provided as
required.
a) Group information
As at 31 March 2023, the details of the Company's subsidiaries
are as follows:
Place of
incorporation % of voting Consolidation Functional
Name of the subsidiary and operation rights % interest method Currency
--------------------------------- --------------- ----------- ---------- ------------- ----------
Hipgnosis Holdings UK
Limited UK 100 100 Full USD
Hipgnosis SFH I Limited UK 100 100 Full USD
Hipgnosis SFH XIII Limited UK 100 100 Full USD
Hipgnosis SFH XIX Limited UK 100 100 Full USD
Hipgnosis SFH XX Limited UK 100 100 Full GBP
RubyRuby (London) Limited
1 UK 100 100 Full GBP
Hipgnosis Songs Group
LLC 2 US 100 100 Full USD
Hipgnosis Acquisition
Corp 2 US 100 100 Full USD
Kennedy Publishing & Productions
Limited 1 UK 100 100 Full GBP
Robot of the Century Music
Publishing Company Inc US 100 100 Full USD
Deamon Limited 1 UK 100 100 Full GBP
PB Songs Ltd 1 UK 100 100 Full GBP
--------------------------------- --------------- ----------- ---------- ------------- ----------
1 These companies are subsidiaries of Hipgnosis SFH XX Limited
and therefore an indirect subsidiary of Hipgnosis Songs Fund
Limited.
2 On 10 September 2020 the Company acquired the entire share
capital of Big Deal Music Group (rebranded to Hipgnosis Songs
Group) which includes BDM Acquisition Corp (rebranded to Hipgnosis
Acquisition Corp) and Big Deal Music LLC (rebranded to Hipgnosis
Songs Group LLC) both incorporated in the US. Big Deal Music LLC is
part of a joint venture with Big Family LLC, a publishing company
which was formed in June 2018 and is equity accounted for in the
Consolidated Financial Statements.
All subsidiaries undertake the same activities as the Group. In
addition, Hipgnosis Songs Group LLC undertakes publishing
administration.
The majority of subsidiaries of the Company are considered tax
resident in the UK and are subject to UK corporation tax. Robot of
the Century Music Publishing Inc is registered in New York,
Hipgnosis Songs Group LLC and Hipgnosis Acquisition Corp. are
registered in Delaware and all are subject to applicable State and
Federal Taxes.
b) Going concern
The Directors monitor the capital and liquidity requirements of
the Company on a regular basis. They have also reviewed cash flow
forecasts prepared by the Investment Adviser which are based in
part on assumptions about the future purchase and returns from
existing Catalogues of Songs and the annual operating cost.
Based on these sources of information and their judgement, the
Directors believe it is appropriate to prepare the Consolidated
Financial Statements of the Group on a going concern basis.
Although the Board is confident that the Company will have
sufficient financial resources to meet their obligations due within
12 months of the reporting date, the outcome of the Continuation
Vote which is due to be held before the end of September 2023 in
accordance with Part I, Section 9 of the latest Company prospectus
creates a material uncertainty that may cast significant doubt on
the Group's ability to continue as a going concern or in its
current form and, therefore, that it may be unable to realize its
assets and discharge its liabilities in line with the current
normal course of business.
c) Basis of preparation
Basis of accounting
The Consolidated Financial Statements have been prepared in
accordance with IFRS and applicable company law. The Consolidated
Financial Statements have been prepared on a historical cost basis
as amended from time to time by the fair valuing of certain
financial assets and liabilities where applicable.
Consolidation
In accordance with section 244 of the Companies Law, the
Directors have elected to prepare only consolidated accounts for
the financial year for the Group. Therefore, there is no
requirement to present individual accounts for the Company within
the Consolidated Financial Statements.
The Company is not considered to be an Investment Entity, as
defined by IFRS 10. Whilst the Company evaluates the Portfolio on a
fair value basis as demonstrated by the Operating NAV provided as
an alternate performance measure, the Company also actively manages
the Songs to add further value and has no defined exit strategy for
any of its investments.
All companies in which the Company has a controlling interest,
namely those in which it has the power to govern financial and
operational policies in order to obtain benefits from their
operations, are fully consolidated. Control as defined by IFRS 10
is based on the following three criteria to be fulfilled
simultaneously to conclude that the parent company exercises
control:
-- a parent company has power over a subsidiary when the parent
company has existing rights that give it the current ability to
direct the relevant activities of the subsidiary, i.e. the
activities that significantly affect the subsidiary's returns.
Power may arise from existing or potential voting rights, or
contractual arrangements. Voting rights must be substantial, i.e.
they shall be exercisable at any time without limitation,
particularly during decision making related to significant
activities. The assessment of the exercise of power depends on the
nature of the subsidiary's relevant activities, the internal
decision-making process, and the allocation of rights among the
subsidiary's other shareowners;
-- the parent company is exposed, or has rights, to variable
returns from its involvement with the subsidiary which may vary as
a result of the subsidiary's performance. The concept of returns is
broadly defined and includes, among other things, dividends and
other economic benefit distributions, changes in the value of the
investment in the subsidiary, economies of scale, and business
synergies; and
-- the parent company has the ability to use its power to affect
the returns. Exercising power without having any impact on returns
does not qualify as control.
Consolidated Financial Statements of a group are presented as if
the Group were a single economic entity. The Group does not include
any non-controlling interest.
Segmental reporting
The chief operating decision maker is the Board of Directors.
All of the Company's income is global but received from sources
within US, Europe and UK. While the Company's income is derived
internationally, the Directors are of the opinion that the Group is
engaged in a single segment of business, being the investment of
the Company's capital in a Portfolio of Song copyrights, together
with the potential for capital growth.
d) Revenue recognition
Bank interest income
Interest income from cash deposits is recognised as it accrues
by reference to the effective interest rate applicable.
Revenue from operations and associated costs
Revenues from operations are recorded when it is probable that
future economic benefits will be obtained by the Group and when
they can be reliably measured. The revenue earned by the Group is
recognised in accordance with IFRS 15 and solely consists of
royalty income, which is divided into these main revenue
categories:
i) Mechanical royalties - these are collected by PROs worldwide
which represent Songwriters and other copyright owners. Mechanical
royalties are also collected by royalty collection agents or the
portfolio administrators with whom the Group contracts. This
includes mechanical income, an element of streaming income and
publishing admin income and digital downloads income;
ii) Performance royalties - these are collected by various PROs
worldwide which represent Songwriters and other copyright owners.
This includes performance income, an element of streaming income
and publishing admin income and writer share income;
iii) Synchronisation fees - these are typically paid directly to
the owner of the relevant copyright or its publisher, on the terms
and in the amounts agreed with the relevant film or television
production company, advertising agency or end customer. This
includes synchronization income and an element of publishing admin
income; and
iv) Masters royalties - these are royalties collected on our
masters rights. These are collected by record companies and
collection agencies and paid to master rights owners based on their
contractual rates. This revenue category includes masters income,
neighbouring rights income and producer royalties.
These revenue categories are further disaggregated into
individual revenue streams which are disclosed in detail in Note
13. The Group follows the same accounting policies in respect of
all revenue streams, unless otherwise disclosed.
As royalty income is typically reported by the royalty
collection agents/performance rights organisations on an arrears
basis via statement and where statements have not been received at
the year end, the Group accrues for revenue relating to processing
delays (outstanding royalty statements/time lag in royalty
reporting) and for the period between consumption and reporting.
This is done by assessing historic and forecasted earnings over the
equivalent reporting period based on evidenced historic revenue
reporting, seasonality and industry consumption and growth rates
since the last statement date.
Licence arrangements for all income types which include
publishing income (mechanical, performance, downloads, Streaming,
Synchronisation and writer share income), income derived from
master recordings and producer royalties.
The Group enters into licence arrangements in respect of
Catalogues of Songs with third-party collection agents. Licences
granted to collection agents are deemed to constitute usage based,
right of use licences as per IFRS 15.
Revenue arising from licences entered into with collection
agents is therefore recognised in the period. Payment is received
once the royalty statement is delivered, the royalty statement
includes amounts covered by both the usage and processing
accrual.
This revenue, which is net of the administration fee retained by
the collection agent, is disaggregated to be reviewed by song usage
period, source of income, work title, reporting period and any
third-party royalty entitlements where necessary.
The contractual basis of the licence arrangements are such that
the agents are deemed as 'principals' for tax purposes, therefore
the Group recognises its revenue net of administration fees.
Where available at the end of each month or at an earlier
interval to which the revenue relates, revenue is recorded on the
basis of royalty statements received from collection agents.
Where notification has not yet been received from collection
agents, an estimate is made of the revenue due to the Group at the
end of the month to which the usage of the music copyright relates.
Estimates are made on the basis of the historical track record of
music Catalogues, ad hoc data provided by collection agents,
industry forecasts and expected seasonal variations.
Non-recourse fixed fee arrangements are recognised at the point
at which control of the licence passes to the collection agents.
Variable consideration is recognised in the period when the usage
of the Catalogues of Songs occurs.
e) Royalty costs
Royalty costs are contractual royalties due to Songwriters,
calculated on a quarterly or semi-annual basis, and these are
deducted from gross revenue when calculating net revenue. Royalty
costs are paid when the Songwriter is in a recouped position. These
royalty costs are associated with Songwriters that are published or
administered by Kobalt or HSG.
f) Expenses
Expenses are accounted for on an accruals basis. Expenses are
charged through the Consolidated Statement of Profit and Loss.
g) Dividends to Shareholders
Dividends are accounted for in the year in which they are paid.
The Company, being a Guernsey regulated entity,
is able to pay dividends out of capital, subject to the
assessment of solvency in accordance with the Companies Law and
subject to a levered free cashflow test as required by the
Revolving Credit Facility. Nonetheless, the Board of Directors
carefully consider any dividend payments made to ensure the
Company's capital is maintained in the longer term. Careful
consideration is also given to ensuring sufficient cash is
available to meet the Company's liabilities as they fall due.
h) Assets
Catalogues of Songs
Catalogues of Songs include music Catalogues, artists' contracts
and music publishing rights and are recognised as intangible assets
measured initially at the fair value of the consideration paid.
Catalogues of Songs are subsequently amortised in expenses over the
useful life of the asset and shown net of any impairment
considered. This amortisation is shown in the Consolidated
Statement of Profit and Loss as 'Amortisation of Catalogues of
Songs'. An assessment of the useful life of each Catalogue is
considered at each reporting period, which is 20 years, in line
with what the Board of Directors and Investment Adviser deem to be
industry standard.
Useful life of intangible assets
In order to calculate the amortised cost of the intangible
assets it is necessary to assess the useful economic life of the
copyright interests in Songs. This requires forecasts of the
expected future revenue from the copyright interests, which
contains uncertainties as the ongoing popularity of a song can
fluctuate unexpectedly. An assessment of the useful life of
Catalogues is considered initially at acquisition, which is 20
years, and assessed for continued applicability at each reporting
period. A useful life of 20 years is what the Board of Directors
and the Investment Adviser deem to be industry standard. Although
an estimate, the Board do not believe that there is significant
judgement applied and as a result no sensitivity has been
performed.
Asset impairment
Intangible assets are subject to a bi-annual review to identify
any indicators of impairment; this review can also be performed
when events or the economic environment indicate a risk of
impairment. When there are indicators of impairment, the
recoverable amount of the asset is compared to the carrying value
of the asset. The recoverable amount is determined as the higher
of: (i) the value in use; or (ii) the fair value as described
hereafter, for each individual asset.
The Fair Value of the Catalogues as calculated by the
Independent Portfolio Valuer is used to identify any indicators
of impairment. The Independent Portfolio Valuer adopts a DCF
valuation approach and applies a number of significant assumptions
to the projected future earnings for all Catalogues including:
-- Market factors impacting revenues;
-- Discount rate, currently 8.5% (31 March 2022: 8.5%); and
-- Terminal value at 16 years.
The fair value uses an IFRS 13 approach that a market
participant might apply and does not factor in the impact of any
future active management by the Investment Adviser or other planned
activities to increase the revenue of those Catalogues. Any
Catalogues which have a carrying value higher than their Fair Value
are at risk of impairment.
As part of the bi-annual impairment review, the Company then
considers whether there are mitigating factors relevant to the
Catalogues which have a carrying value higher than their Fair Value
to assess if there is a residual risk of impairment in the
Catalogues. These factors include a requirement that the
Catalogue's Fair Value has been lower than its carrying value for a
period of at least 2 years and any future planned activities by the
artist which are not factored into the fair value model but could
reasonably be expected to increase the future earnings of the
Catalogue.
After the above mitigating factors have been applied, a
Value-In-Use is calculated for any Catalogues with a residual risk
of impairment. The Value-In-Use is calculated by using the original
projected cash flows used during the Fair Value calculation by the
Independent Portfolio Valuer, with a 0.5% reduction to the discount
rate. The reduction in the discount rate reflects the Company's
ability to drive additional value through active management of a
Catalogue and addresses the passive nature of the Company's cash
flows. If the Value-In-Use calculation for the Catalogue is lower
than the carrying value of the Catalogue, an impairment loss equal
to the difference between the Value-In-Use calculated and the
carrying value is recognised in the Consolidated Statement of
Profit and Loss. The impairment losses recognised in respect of
intangible assets may be reversed in a later period if the
recoverable amount becomes greater than the carrying value, within
the limit of impairment losses previously recognised.
The impairment review is performed at an individual Catalogue
level with the exception of Kobalt. The Kobalt portfolio contains a
number of Catalogues; the Company identifies a number of these
Catalogues as 'key Catalogues'. The Company has performed a
purchase price allocation within the Kobalt portfolio between the
key Catalogues and the other Catalogues. The key Catalogues
represent 91% of the carrying value of the Kobalt portfolio. The
Portfolio Independent Valuer values both the key Catalogues and the
remaining Catalogues within the Kobalt portfolio under the same
methodology as the other Catalogues held by the Company. The
impairment review for both the key Catalogues and the remaining
Catalogues within the Kobalt portfolio follow the same process as
the other Catalogues held by the Company.
Loans and receivables
Trade receivables, loans, and other receivables that have fixed
or determinable payments that are not quoted in an active market
are initially measured at fair value plus transaction costs
directly attributable to the acquisition and subsequently measured
at amortised cost using the effective interest method, less
allowance for Expected Credit Loss (Note 4). Interest income is
recognised by applying the effective interest rate, except for
short term receivables when the recognition of interest would be
immaterial.
Held for trading derivative financial assets
Derivative financial assets that are held for trading and whose
performance is evaluated on a fair value basis are measured at fair
value through profit and loss (FVTPL). Net unrealised and realised
gains and net unrealised and realised losses (including any
interest expense if applicable) are recognised in the Consolidated
Statement of Profit and Loss.
Derecognition of assets
The Group derecognises an asset only when the contractual rights
to the cash flows from the asset expire, or when it transfers the
asset and substantially all the risks and rewards of ownership of
the asset to another entity.
If the Group neither transfers nor retains substantially all the
risks and rewards of ownership and continues to control the
transferred asset, the Group recognises its retained interest in
the asset and an associated liability for amounts it may have to
pay.
On derecognition of an asset in its entirety, the difference
between the asset's carrying amount and the sum of the
consideration received is recognised in the Consolidated Statement
of Profit and Loss.
i) Catalogue bonus provision
Under the terms of the acquisition agreements for Catalogues,
the Group recognises a financial liability for consideration that
may be payable in line with the acquisition agreements that are
dependent on the performance of the respective Catalogues. Such
financial liabilities are initially recognised at fair value and
subsequently carried at amortised cost. Management consider both
the revenue forecasts used in the independent valuation and their
expectation of revenue expected to be received within the specified
performance time frame of acquiring the Catalogues when assessing
the initial recognition of this financial liability. At 31 March
2023 a provision for the financial liability of $45.0 million was
recognised as a Catalogue bonus provision given the likelihood of
economic outflow being triggered through respective Catalogue
performance (31 March 2022: $1.3 million).
j) Deferred consideration
In such cases where payment is deferred and capitalised under
the terms of the acquisition agreements for Catalogues, a liability
will be recognised at net present value with any associated finance
charge to be accrued over the respective deferral period.
k) Financial liabilities and equity
Financial liabilities are classified as either financial
liabilities or as equity in accordance with the substance of the
contractual arrangement.
Equity instruments
An equity instrument is any contract that evidences a residual
interest in the assets of an entity after deducting all of its
liabilities. Equity instruments issued by the Company are
recognised at the value of proceeds received, net of direct issue
costs.
Repurchase of the Company's own equity instruments is recognised
and deducted directly in equity. No gain or loss is recognised in
the Consolidated Statement of Profit and Loss on the purchase,
sale, issue or cancellation of the Company's own equity
instruments.
Loans and borrowings
Loans and borrowings are initially measured at fair value, net
of transaction costs.
Financial liabilities are subsequently measured at amortised
cost using the effective interest method, with interest expense
recognised on an effective yield basis.
Held for trading derivative financial liabilities
Held for trading derivative financial liabilities are classified
as measured at fair value through profit and loss (FVTPL).
Financial liabilities at FVTPL are measured at fair value. Net
unrealised and realised gains and net unrealised and realised
losses (including any interest expense if applicable) are
recognised in the Consolidated Statement of Profit and Loss.
Derecognition of financial liabilities
The Group derecognises financial liabilities when, and only
when, the Group's obligations are discharged, cancelled or they
expire. On derecognition of a financial liability, the difference
between the carrying amount extinguished and the consideration paid
(including any non-cash assets transferred or liabilities assumed)
is recognised in the Consolidated Statement of Profit and Loss.
l) Share-based payments
Investment Adviser's performance fee
The Group recognises the variable fee for the services received
in a share-based payment transaction as the Group becomes liable to
the variable fee on an accruals basis.
The fair value of the performance fee, as defined in the
Investment Advisory Agreement, which is payable to the Investment
Adviser in Shares is recognised as an expense when the fees are
earned with a corresponding increase in equity.
m) Cash and cash equivalents
Cash at bank and short-term deposits which are held to maturity
are carried at cost. Cash and cash equivalents are defined as call
deposits, short term deposits with a term of no more than 3 months
from the start of the deposit and highly liquid investments readily
convertible to known amounts of cash and subject to insignificant
risk of changes in value. Cash and cash equivalents consist of cash
in hand and short-term deposits in banks with an original
maturity
of 3 months or less.
n) Functional and foreign currency
Determination of functional currency
Whilst the functional currency of the Company is Dollars, some
subsidiaries have a functional currency of Sterling which is
translated into the presentation currency. The entities which
continue to have a functional currency of Sterling are shown in
Note 2(a).
Items included in the Consolidated Financial Statements of each
of the Group's entities are measured using the currency of the
primary economic environment in which each entity operates ("the
functional currency"). The Consolidated Financial Statements are
presented in Dollars, which is the Group's functional and
presentation currency of the Company and each of its
subsidiaries.
Treatment of foreign currency
At the balance sheet date, monetary assets and liabilities that
are denominated in foreign currencies are translated at the rates
prevailing at that date. Non-monetary items carried at fair value
that are denominated in foreign currencies are translated at the
rates prevailing at the date when the fair value was determined.
Non-monetary items that are measured in terms of historical cost in
a foreign currency are not retranslated. Exchange differences are
recognised in the Consolidated Statement of Profit and Loss in the
year in which they arise. Transactions denominated in foreign
currencies are translated into Dollars at the rate of exchange
ruling at the date of the transaction.
3. Business combinations
The acquisition method of accounting is used to account for all
business combinations, regardless of whether equity instruments or
other assets are acquired. The consideration transferred for the
acquisition of a subsidiary comprises the:
-- fair values of the assets transferred;
-- liabilities incurred to the former owners of the acquired
business;
-- equity interests issued by the Group;
-- fair value of any asset or liability resulting from a
contingent consideration arrangement; and
-- fair value of any pre-existing equity interest in the
subsidiary.
Identifiable assets acquired and liabilities and contingent
liabilities assumed in a business combination are, with limited
exceptions, measured initially at their fair values at the
acquisition date.
The excess of the:
-- consideration transferred; and
-- acquisition-date fair value of any previous equity interest
in the acquired entity over the fair value of the net identifiable
assets acquired is recorded as goodwill. If those amounts are less
than the fair value of the net identifiable assets of the business
acquired, the difference is recognised directly in Consolidated
Statement of Profit and Loss as a bargain purchase.
Where settlement of any part of cash consideration is deferred,
the amounts payable in the future are discounted to their present
value as at the date of exchange. Contingent consideration is
classified either as equity or a financial liability. Amounts
classified as a financial liability are subsequently remeasured to
fair value, with changes in fair value recognised in the
Consolidated Statement of Profit and Loss.
4. Significant accounting judgments, estimates and
assumptions
The preparation of the Group's Consolidated Financial Statements
requires the application of estimates and assumptions which may
affect the results reported in the Consolidated Financial
Statements. Uncertainty about these estimates and assumptions could
result in outcomes that require a material adjustment to the
carrying amount of the asset or liability affected in future
periods. Estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised in
the period in which the estimates are revised and in any future
periods affected.
The key assumptions concerning the future and other key sources
of estimation uncertainty at the reporting date, that have a
significant risk of resulting in a material adjustment to the
carrying amounts of assets and liabilities within the next
financial year, are discussed below. The Group based its
assumptions and made estimates based on the information available
when the Consolidated Financial Statements were prepared. However,
these assumptions and estimates may change based on market changes
or circumstances beyond the control of the Group.
Critical estimates in applying the Group's accounting policies -
revenue recognition and royalty costs
Accrued income as at 31 March 2023 was $126.2 million (31 March
2022: $105.3 million), a breakdown of which is set out below:
-- $62.3 million for earnings where, due to the time lag in
royalty reporting. Statements are not expected to be received until
calendar Q2 2023 onwards. This includes international PRO reporting
and HSG (31 March 2022: $69.3 million).
-- $21.7 million CRB III accruals (31 March 2022: $Nil) as
discussed below.
-- $42.2 million Usage Accrual, which recognises revenues that
have triggered a contractual payment but have not been paid to, and
processed by, collection societies, publishers and administrators
(31 March 2022: $36.0 million).
In calculating accruals, the Company makes judgments around
seasonality, over or under performance, and commercial factors
based on historical performance, and its knowledge of each
Catalogue through its regular correspondence with the various
administrators, record labels and international societies. The
Company also makes an estimate of revenue from consumption to
reporting.
Estimated royalty revenue receivable is accrued for on the basis
of historical earnings for each Catalogue, which incorporates an
element of uncertainty. The estimated revenue accrual may not
therefore directly equal the actual cash received in respect of
each accounting period and adjustments may therefore be required
throughout the financial period when the actual revenue received is
known, and these adjustments may be material.
Net revenues also include an accrual for performance income, to
account for the writer's share of Performance royalties which are
subject to a significant time lag in reporting in the industry, but
which the Group is entitled to receive in due course. In
recommending the estimate of this accrual to the Board of Directors
the Investment Adviser used its analysis of each Catalogue's
revenue history as well its knowledge of the respective Catalogue
performance trends to recommend the estimated accruals.
Net revenue is subject to a royalty cost accrual applied to
gross revenue receipts primarily within the Hipgnosis Songs Group
("HSG") subsidiaries. Royalty cost accruals represent contractual
royalties due to Songwriters and other rights holders that are
payable on a 6-monthly basis for writers under publishing contracts
and quarterly for clients under administration contracts. Royalty
rates vary by writer (negotiated by contract) and by revenue
stream.
In July 2022, after a lengthy process, the 2018-22 rate
increases on the Songwriter's and publisher's mechanical portion of
US Streaming income, known as CRB III, were finally agreed. The
Group has reflected accruals of $21.7 million for the year ended 31
March 2023 as a result of the confirmation of the CRB III rate
increases for the Songwriters' mechanical portion of US Streaming
income. Of this, $5.6 million is the impact of the higher 15.1%
rate on the income earned by the Company during the year and $16.1
million has been recognised for the retro-active payment due as a
result of revenues historically not having been recognised at the
full CRB III rates. The amount recognised in relation to the
retro-active payment will not recur in future years. As the ruling
was made final in July 2022 there was no CRB III revenue recognised
in the prior year.
Both the CRB III retroactive and uplift accruals are based off
historical earnings paid through to the Company by Publishers. In
order to calculate the accrual, the US mechanical portion of those
earnings were analysed and uplifted accordingly based on the CRB
III rates over the five year period from 2018 to 2022.
Whilst some Publishers had different policies regarding the
distribution of the higher rates received from DSPs up to when the
CRB III ruling was appealed, the Company has applied a consistent
approach and has not considered any Publisher specific policies
given the lack of clarity from the various payors.
In order to provide additional rigour on the calculation, the
CRB III retroactive and uplift accrual estimates were compared and
benchmarked against the estimates provided by the Portfolio
Independent Valuer and the fair value appraiser for the CNB
Revolving Credit Facility.
A sensitivity of the significant estimates used in calculating
accrued income and the impact of the sensitivities on the balance
is performed below:
31 March Sensitivity Sensitivity
Name of the subsidiary 2023 +10% -10%
---------------------------------------- ------------- ------------- ---------------
Accruals due to the time lag in royalty
reporting $62.3 million $6.2 million ($6.2) million
CRB III accruals* $21.7 million $2.2 million ($2.2) million
---------------------------------------- ------------- ------------- ---------------
One quarter One quarter
increase reduction
---------------------------------------- ------------- ------------- ---------------
Usage accrual 42.2 million $10.8 million ($10.1 million)
---------------------------------------- ------------- ------------- ---------------
* The CRB III sensitivity represents the variability of the
historical US streaming mechanical revenue that the contractual
rates are applied to.
Expected Credit Loss (ECL) in relation to revenue
receivables
Royalty earnings for accruals and receivables recognised in the
year ended 31 March 2023 are distributed by PROs, Publishers and
Record Labels who collect royalties at the source of usage and
distribute those earnings directly to Hipgnosis.
The probability of future default has been deemed close to nil,
due to the long-standing history of PROs, Publishers and Record
Labels within the music industry and the existing framework of cash
collection amongst the Company's stakeholders. Whilst there are
smaller/newer organisations that have relatively unproven credit
resilience these account for a small minority of the Group's
receivables.
The Company's current risk assessment includes analysis of the
exposure to commercial risk by PROs, Publishers and Record Labels,
and the likely impact of their credit risk on Hipgnosis' revenue
streams. This impact is considered immaterial and a sensitivity
analysis on this is performed in Note 8.
Expected Credit Loss (ECL) in relation to HSG advances
Hipgnosis Songs Group LLC advances royalty payments to
Songwriters. Management are required to assess the recoverability
of these advances bi-annually in accordance with IFRS 9 Financial
Instruments. Management will consider market conditions and
historic trading patterns affecting the relevant assets.
Management adopts a simplified approach, has analysed their
historical loss ratio data and applied this using a risk based
methodology as there are no defined terms of repayment related to
advances. The risk categories against which the historical loss
ratios are assessed and expected credit losses are calculated
are:
-- low risk advances where the advance is expected to be
recouped in full under the terms of the writer's agreement (because
of the writer's reputation, previous success etc);
-- medium risk advances where there is reasonable expectation
that a level of the advances will be recouped; and
-- high risk advances, where management believe that either
because of the writer's unknown potential or other factors, a large
level of recoverability may not be achieved.
At 31 March 2023 HSG gross recoupable advances are $32.0 million
(31 March 2022: $31.6 million) with an expected credit loss
provision of $15.5 million (31 March 2022: $13.0 million)
recognised against the advances. A sensitivity analysis on this
provision is performed in Note 8.
Assessment of impairment and the calculation of Operative
NAV
As disclosed in Note 2(h) intangible assets are subject to a
bi-annual review to identify any indicators of impairment.
The Fair Value of the Catalogues as calculated by the
Independent Portfolio Valuer is used to identify any indicators of
impairment. The Portfolio Independent Valuer adopts a DCF valuation
approach and applies a number of significant assumptions to the
projected future earnings for all Catalogues including:
-- Market factors impacting revenues;
-- Discount rate, currently 8.5% (31 March 2022: 8.5%); and
-- Terminal value at 16 years.
As disclosed in Note 2(h) a Value-In-Use is calculated for any
Catalogues with a residual risk of impairment. The Value-In-Use is
calculated by using the original projected cash flows used during
the Fair Value calculation by the Independent Portfolio Valuer,
with a 0.5% reduction to the discount rate. The reduction in the
discount rate reflects the Company's ability to drive additional
value through active management of a Catalogue and addresses the
passive nature of the Company's cash flows within the Portfolio
Independent Valuer's fair value analysis.
If the Value-In-Use calculation for the Catalogue is lower than
the carrying value of the Catalogue, an impairment loss equal to
the difference is recognised in the Consolidated Statement of
Profit and Loss. The impairment losses recognised in respect of
intangible assets may be reversed in a later period if the
recoverable amount becomes greater than the carrying value, within
the limit of impairment losses previously recognised.
Management's impairment review as at 31 March 2023 concluded
that an impairment of $3.9 million (31 March 2022: $1.5 million)
was required to the Group's Catalogues. A sensitivity analysis on
the Value-In-Use calculation and impact on the impairment charge is
performed in Note 6.
5. Taxation
The major components of income tax expense for the years ended
31 March 2023 and 31 March 2022 are:
1 April 2022
to
1 April 2021
31 March to 31 March
2023 2022
Current tax $'000 $'000
----------------------------------------------------- ------------ ------------
United Kingdom corporation tax based on the loss
for the year at 19% (31 March 2022: 19%) - 123
Adjustments in respect of prior periods 2,837 2,369
Non-reclaimable withholding tax on royalty payments
received 171 251
----------------------------------------------------- ------------ ------------
Total current tax 3,008 2,743
----------------------------------------------------- ------------ ------------
Deferred tax
Origination and reversal of timings differences 656 -
Deferred tax asset recognised to extent of liability
on timing difference (656) -
----------------------------------------------------- ------------ ------------
Total deferred tax - -
----------------------------------------------------- ------------ ------------
Total tax 3,008 2,743
----------------------------------------------------- ------------ ------------
Prior to 1 April 2021 the Company was Guernsey tax resident but
exempt from taxation in Guernsey under the provisions of the Income
Tax (Exempt Bodies) (Guernsey) Ordinance, 1989.
From 1 April 2021 the Company was granted investment trust
company status by HMRC and is UK tax resident from that date.
Whilst the Company is incorporated in Guernsey, the majority of
the Company's subsidiaries are incorporated and tax resident in the
UK and the majority of the Group's income and expenditure in
incurred in these UK entities. Therefore is it considered most
appropriate to prepare the tax reconciliation below at the standard
UK tax rate of 19% (31 March 2022: 19%).
The March 2021 UK Budget announced an increase to the main rate
of UK corporation tax to 25% from April 2023. This rate was
substantively enacted prior to the balance sheet date and
consequently this rate has been considered when assessing items of
deferred tax.
The actual tax charge differs from the standard rate for the
reasons set out in the following reconciliation:
1 April 2022
to
1 April 2021
31 March to 31 March
2023 2022
$'000 $'000
-------------------------------------------------------- ------------ ------------
Loss on the Group's ordinary activities before tax (86,630) (16,700)
Tax on the loss on the Group's ordinary activity
at the standard UK rate of 19% (16,460) (3,173)
Factors affecting charge for the year:
Expenses not deductible for tax purposes 3,405 887
Adjustment in respect of previous periods 2,837 2,369
Effect of overseas tax rate (649) (760)
Deferred tax not recognised - US 2,704 3,169
Deferred tax not recognised - UK 11,000 -
Net non-reclaimable withholding tax on royalty payments
received 171 251
-------------------------------------------------------- ------------ ------------
Total actual amount of current tax 3,008 2,743
-------------------------------------------------------- ------------ ------------
1 April 2022
to
1 April 2021
31 March to 31 March
2023 2022
Deferred tax $'000 $'000
---------------------------------------------------- ------------ ------------
Short term timing differences related to hedging
arrangements 656 -
Deferred tax asset recognised in relation to UK tax
losses (656) -
---------------------------------------------------- ------------ ------------
Total deferred tax - -
---------------------------------------------------- ------------ ------------
The following potential deferred tax assets have not been
recognised as it is not considered suitably probable that such
assets will be utilised based on forecasts.
31 March 31 March
2023 2022
Deferred tax $'000 $'000
-------------------------------------------------- -------- --------
Unrecognised deferred tax asset in relation to UK
tax losses (14,474) -
Unrecognised deferred tax asset in relation to US
tax losses (5,873) (3,169)
-------------------------------------------------- -------- --------
There is currently no expiry date for the utilisation of UK tax
losses.
The unrecognised deferred tax asset in relation to UK and US
losses arise on the following tax losses:
31 March 31 March
2023 2022
$'000 $'000
-------------- -------- --------
UK tax losses (57,895) -
US tax losses (23,490) (12,676)
-------------- -------- --------
Disposals of Catalogues may give rise to potential tax charges
depending on the availability of tax attributes (tax losses) to
offset any taxable gains otherwise arising. There were no such
disposals of Catalogues in the year (or prior year) and so no such
tax liabilities arose.
6. Catalogues of Songs
$'000
------------------------------- ---------
Cost
At 1 April 2022 2,237,284
Additions -
At 31 March 2023 2,237,284
------------------------------- ---------
Amortisation and impairment
At 1 April 2022 200,552
Amortisation 111,583
Impairment 3,901
------------------------------- ---------
At 31 March 2023 316,036
------------------------------- ---------
Net book value
At 1 April 2022 2,036,732
At 31 March 2023 1,921,248
Fair value as at 31 March 2023 2,802,762
------------------------------- ---------
Cost
At 1 April 2021 1,972,199
Additions 265,085
------------------------------- ---------
At 31 March 2022 2,237,284
------------------------------- ---------
Amortisation and impairment
At 1 April 2021 93,275
Amortisation 105,787
Impairment 1,490
------------------------------- ---------
At 31 March 2022 200,552
------------------------------- ---------
Net book value
At 1 April 2021 1,878,924
At 31 March 2022 2,036,732
------------------------------- ---------
Fair value as at 31 March 2022 2,693,974
------------------------------- ---------
The Group amortises Catalogues of Songs with a limited useful
life using the straight-line method of 20 years (other than in
exceptional circumstances for specific Catalogues of Songs). An
assessment of the useful life of Catalogues is considered at each
reporting period, which is 20 years, in line with what the Board of
Directors and the Investment Adviser deem to be industry standard.
The Company performs an impairment review as disclosed in Note
2(h). At 31 March 2023 accumulated amortisation for Catalogues of
Songs is $310.6 million (31 March 2022: $199.1 million) and the
accumulated impairment to date is $5.4 million (31 March 2022: $1.5
million).
The Board engaged Portfolio Independent Valuer, Citrin Cooperman
Advisors LLC, to value the Catalogues as at 31 March 2023. The
Board has approved and adopted the valuations prepared by the
Portfolio Independent Valuer which are used as an input into the
impairment review process and for the Operative NAV.
The sensitivity of the discount rate to the fair value of the
Portfolio is as follows:
Discount Rate 8.00% 8.50% 9.00%
------------------------------- --------- --------- ---------
Portfolio Value ($'000) 3,065,753 2,802,762 2,580,725
Variance to Fair Value ($'000) 262,991 - (222,037)
Variance to Fair Value (%) 9.4% - (7.9%)
------------------------------- --------- --------- ---------
The sensitivity of the terminal value growth rate to the fair
value of the Portfolio is as follows:
Sensitivity to the Terminal Value Growth
Rate -1.00% Current +1.00%
----------------------------------------- --------- --------- ---------
Portfolio Value ($'000) 2,637,623 2,802,762 3,035,424
Variance to Fair Value ($'000) (165,139) - 232,662
Variance to Fair Value (%) (5.9%) - 8.3%
----------------------------------------- --------- --------- ---------
The sensitivity of the applied growth rate to the fair value of
the Portfolio is as follows:
Growth Rate -1.00% Current +1.00%
------------------------------- --------- --------- ---------
Portfolio Value ($'000) 2,573,221 2,802,762 3,048,641
Variance to Fair Value ($'000) (229,541) - 245,879
Variance to Fair Value (%) (8.2%) - 8.8%
------------------------------- --------- --------- ---------
A Value-In-Use is calculated for any Catalogue with a residual
risk of impairment following the impairment review. The
Value-In-Use is calculated by using the original projected cash
flows used during the Fair Value calculation by the Portfolio
Independent Valuer, with a 0.5% reduction to the discount rate.
The sensitivity of the Value-In-Use calculation to the
impairment charge is as follows:
Discount Rate used in the Value-In-Use calculation -0.50% Current +0.50%
--------------------------------------------------- ------ ------- ------
Impairment of Catalogues of Songs ($'000) 1,378 3,901 11,934
--------------------------------------------------- ------ ------- ------
7. Cash and cash equivalents
31 March 31 March
2023 2022
$'000 $'000
------------------------- -------- --------
Cash available on demand 37,965 30,067
------------------------- -------- --------
37,965 30,067
------------------------- -------- --------
8. Trade and other receivables
31 March 31 March
2023 2022
$'000 $'000
------------------------------ -------- --------
Non-current receivables
Accrued income 13,210 640
------------------------------ -------- --------
13,210 640
------------------------------ -------- --------
Current receivables
Accrued income 112,943 104,658
Royalties receivable 7,078 6,605
HSG net recoupable advances 16,436 18,604
Prepayments and other debtors 3,542 7,274
VAT Receivable - 7,309
------------------------------ -------- --------
139,999 144,450
------------------------------ -------- --------
In the current year, an accrual for $21.7 million has been
recognised as a result of the confirmation of the CRB III rate
increases for the Songwriters' mechanical portion of US Streaming
income. Of this, $5.6 million is the impact of the higher 15.1%
rate on the income earned by the Company during this financial year
and $16.1 million has been recognised for the retro-active payment
due as a result of revenues historically not having been recognised
at the full CRB III rates.
At 31 March 2023, the aging of the Company's trade and other
receivables are:
Between Between Total
Less than 1-3 3-12 1 and 2 and Over contractual
1 month months months 2 years 5 years 5 years cash flows
$'000 $'000 $'000 $'000 $'000 $'000 $'000
---------------------------- --------- ------- ------- -------- -------- -------- ------------
Accrued income 4,430 34,593 73,920 13,210 - - 126,153
Royalties receivable 2,960 2,701 1,417 - - - 7,078
HSG net recoupable advances 99 119 16,218 - - - 16,436
Prepayments and other
debtors 86 142 3,314 - - - 3,542
---------------------------- --------- ------- ------- -------- -------- -------- ------------
Total 7,575 37,555 94,869 13,210 - - 153,209
---------------------------- --------- ------- ------- -------- -------- -------- ------------
Credit Risk and Provision for Expected Credit Losses
The Group has applied IFRS 9, Financial Instruments, during the
year, which includes the requirements for calculating a provision
for expected credit losses on financial assets. As disclosed in
Note 4, the probability of future default against revenue
receivable balances has been deemed close to nil. At 31 March 2023,
an ECL provision is recognised against the HSG recoupable advances
as below:
High Risk Medium Risk Low Risk Total
At 31 March 2023 $'000 $'000 $'000 $'000
------------------------------------- --------- ----------- -------- --------
Expected loss rates -100.0% -24.0% 0.0% -48.6%
Gross carrying amounts 13,000 10,520 8,436 31,956
Provision for expected credit losses (13,000) (2,520) - (15,520)
------------------------------------- --------- ----------- -------- --------
Net carrying amounts - 8,000 8,436 16,436
------------------------------------- --------- ----------- -------- --------
High Risk Medium Risk Low Risk Total
At 31 March 2022 $'000 $'000 $'000 $'000
------------------------------------- --------- ----------- -------- --------
Expected loss rates -100.0% -41.1% 0.0% -41.1%
Gross carrying amounts 6,712 15,324 9,576 31,612
Provision for expected credit losses (6,712) (6,296) - (13,008)
------------------------------------- --------- ----------- -------- --------
Net carrying amounts - 9,028 9,576 18,604
------------------------------------- --------- ----------- -------- --------
If the probability of future default against the revenue
receivable balances was 5% higher, this would result in a $0.4
million increase to the ECL provision on revenue receivables. If
the probability of future default against the medium risk HSG
recoupable advances was 41.1%, which is consistent with the prior
year, this would result in a $1.8 million increase to the ECL
provision on HSG recoupable advances.
9. Loans and borrowings
On 30 September 2022 the Company entered into a new Revolving
Credit Facility (RCF) with a commitment of $700 million which runs
for five years until 30 September 2027. City National Bank is lead
arranger and sole bookrunner for the new debt facility with Truist
Securities, Inc., MUFG Union Bank, N.A. and Fifth Third Bank as
co-leads. On the same day the Company drew down $607 million, as
part of the arrangement City National Bank repaid in full the
Company's pre-existing J.P. Morgan RCF of $600 million directly to
J.P. Morgan and paid $5.2 million of fees on behalf of the Company.
The remaining $1.8 million was received as cash by the Company.
During the year $6.2 million of costs relating to the set-up of the
new RCF were capitalised, to be amortised over the five year length
of the agreement. On derecognition of the pre-existing J.P. Morgan
RCF, $5.0 million was recognised as a borrowing cost extinguishment
charge and represents the unamortised capitalised borrowing costs
on the pre-existing J.P. Morgan RCF.
On 31 March 2023 the Company repaid $7 million of the new RCF.
$100 million remains available under the new RCF which provides the
Company with flexibility to fund investments and provide additional
working capital.
Interest on the new facility charged is based on the Secured
Overnight Financing Rate (SOFR), published by the New York Federal
Reserve, plus a margin of either 2.00% or 2.25% depending on the
gross drawn debt. The current margin is 2.00%. As disclosed in Note
17, the Company has entered into an interest rate swap agreement to
manage its exposure to interest rate risk.
The RCF's key covenants are set out in the below table:
31 March
Key financial covenant 2023 Actual Lender Covenants
---------------------------------------------- ------------ --------------------
i) Total debt to Catalogue value as determined
by the lender 31.5% Must not exceed 40%
ii) Total debt leverage 5.5:1.0 Not greater than 7:1
iii) Fixed charge coverage 1.3:1.0 Not less than 1:1
---------------------------------------------- ------------ --------------------
The Catalogue value as determined by the lender is specifically
prepared for the banking syndicate based on a set of assumptions
that reflect an immediate sale of the portfolio in order to provide
maximum loan security.
The covenants are reviewed quarterly and are secured by, inter
alia, a charge over the shares in all the subsidiaries of the
Company, a charge over all of their assets including all Catalogues
of Songs of the Company held through these subsidiaries and a
charge over the bank accounts of the Company and its subsidiaries.
The Company has also provided a parent company guarantee. In
accordance with the Investment Policy, any borrowings by the
Company will not exceed 30% of the Operative NAV which is $694.8
million.
31 March 31 March
2023 2022
$'000 $'000
-------------------------------------------------- --------- --------
Opening balance 600,000 577,292
Amounts drawn down during the period 607,000 72,708
Amounts repaid during the year - pre-existing RCF (600,000) (50,000)
Amounts repaid during the year - new RCF (7,000) -
-------------------------------------------------- --------- --------
Total loan drawn down 600,000 600,000
-------------------------------------------------- --------- --------
Cumulative borrowing costs (5,572) (6,008)
-------------------------------------------------- --------- --------
Closing balance 594,428 593,992
-------------------------------------------------- --------- --------
During the year ended 31 March 2023 $33.7 million (31 March
2022: $20.4 million) was charged as interest on the amounts drawn
down.
10. Liabilities and accrued expenses
31 March 31 March
2023 2022
$'000 $'000
----------------------------- -------- --------
Non-current liabilities
Catalogue bonus provision 33,080 925
----------------------------- -------- --------
33,080 925
----------------------------- -------- --------
Current liabilities
Amounts owed to Songwriters 18,799 16,957
Catalogue bonus provision 11,962 398
Deferred investment payable - 10,799
Loan interest payable 9,891 500
Trade creditors and accruals 5,846 4,106
PRO Advances 3,178 -
Corporation tax payable 67 2,570
VAT 1,789 -
Lease liability 735 -
Directors fees payable 27 83
Other creditors 794 -
----------------------------- -------- --------
53,088 35,413
----------------------------- -------- --------
The Group has a number of Catalogue bonuses which are dependent
on the individual Catalogues meeting certain defined performance
hurdles as defined in the Catalogue acquisition agreements which
the Group consider when assessing the recognition of the Catalogue
bonus provision as a financial liability. As at 31 March 2023, the
Group recognised a financial liability of $45.0 million relating to
the bonuses on 6 Catalogues (31 March 2022: $1.3 million relating
to 2 Catalogues). Management consider that the carrying value of
this financial liability would not differ significantly from its
fair value. The last performance hurdle period to be assessed
across the remaining Catalogues is 29 January 2029.
11. Share capital and capital management
Ordinary Share Capital
The share capital of the Company may consist of an unlimited
number of:
i) Ordinary Shares of no par value which upon issue the
Directors may classify as Ordinary Shares;
ii) C Shares denominated in such currencies as the Directors may
determine; and
iii) Ordinary Shares purchased by the Company through share
repurchases and held as Treasury Shares.
Ordinary Shares of no par value
Treasury
No. of Units Share Capital Reserve
outstanding $'000 $'000
-------------------------------------------- ------------- ------------- --------
Issued and fully paid:
Shares as at 1 April 2022 1,211,214,286 1,692,198 -
Repurchase of ordinary shares into treasury (2,000,000) - (1,961)
-------------------------------------------- ------------- ------------- --------
Shares as at 31 March 2023 1,209,214,286 1,692,198 (1,961)
-------------------------------------------- ------------- ------------- --------
Treasury
No. of Units Share Capital Reserve
outstanding $'000 $'000
-------------------------------------------- ------------- ------------- --------
Issued and fully paid:
Shares as at 1 April 2021 1,073,440,268 1,466,851 -
Shares issued on 29 April 2021 9,000,000 14,938 -
Shares issued on 9 July 2021 128,774,018 214,764 -
Share issue costs - (4,355) -
-------------------------------------------- ------------- ------------- --------
Shares as at 31 March 2022 1,211,214,286 1,692,198 -
-------------------------------------------- ------------- ------------- --------
As at 31 March 2023 the Company's authorised and issued share
capital consisted of 1,211,214,286 ordinary shares,
of which 2,000,000 were held In treasury.
On 29 April 2021 the Company issued 9,000,000 new Ordinary
Shares at a price of 119.5p per Ordinary Share and on 9 July 2021
the Company issued 128,774,018 new Ordinary Shares at a price of
121p per Ordinary Share. These shares rank pari passu with the
existing Ordinary Shares in issue. The net proceeds have been used
to fund an investment in accordance with the Company's Investment
Policy.
Under the Company's Articles of Incorporation, each Shareholder
present in person or by proxy has the right to one vote at general
meetings. On a poll, each Shareholder is entitled to one vote for
every Ordinary Share held.
Shareholders are entitled to all dividends paid by the Company
and, on a winding up, provided the Company has satisfied all of its
liabilities, the Shareholders are entitled to all of the residual
assets of the Company.
Treasury Share Reserve
During the year, the Company launched a Share Repurchase Program
to repurchase Ordinary Shares. The repurchased shares are not
cancelled but held as Treasury Shares by the Company. Treasury
shares hold no voting rights, are not entitled to a dividend and
are excluded from the EPS, IFRS and Operative net asset value per
share calculation. The consideration for the shares repurchased are
detailed below:
Consideration
No. of Shares per Share Amount
repurchased GBP $'000
--------------------------------------- ------------- ------------- ------
Shares repurchased on 18 October 2022 250,000 0.85850 240
Shares repurchased on 19 October 2022 250,000 0.84320 235
Shares repurchased on 28 October 2022 250,000 0.88000 252
Shares repurchased on 31 October 2022 250,000 0.88000 252
Shares repurchased on 1 November 2022 250,000 0.87200 250
Shares repurchased on 2 November 2022 250,000 0.85826 246
Shares repurchased on 17 November 2022 250,000 0.82890 238
Shares repurchased on 2 December 2022 250,000 0.83400 248
--------------------------------------- ------------- ------------- ------
Treasury Shares as at 31 March 2023 2,000,000 1,961
--------------------------------------- ------------- ------------- ------
12. Net Asset Value per share and Operative Net Asset Value per
share
31 March 31 March
2023 2022
-------------------------------------- ------------- -------------
Number of Ordinary Shares outstanding 1,209,214,286 1,211,214,286
IFRS NAV per share (cents) 118.63 130.65
Operative NAV per share (cents) 191.53 184.91
-------------------------------------- ------------- -------------
The IFRS NAV per share and the Operative NAV per share are
arrived at by dividing the IFRS Net Assets and Operative Net Assets
(respectively) by the number of Ordinary Shares outstanding.
Catalogues of Songs are classified as intangible assets and
measured at amortised cost or cost less impairment in accordance
with IFRS.
The Directors are of the opinion that an Operative NAV provides
a meaningful alternative performance measure and the values of
Catalogues of Songs are based on fair values produced by the
Portfolio Independent Valuer.
Reconciliation of IFRS NAV to Operative NAV
31 March 31 March
2023 2022
$'000 $'000
---------------------------------------------------- --------- ---------
IFRS NAV 1,434,534 1,582,399
---------------------------------------------------- --------- ---------
Adjustments for revaluations of Catalogues of Songs
to fair value 565,478 457,441
Reversal of accumulated amortisation and impairment 316,036 199,800
---------------------------------------------------- --------- ---------
Operative NAV 2,316,048 2,239,640
---------------------------------------------------- --------- ---------
Tax considerations
As noted in the Chair's Statement, the Board are considering a
number of options to enhance Shareholder value which may include
the potential strategic sale of Catalogues of Songs. The Company's
Investment Trust Company (ITC) status may allow for the Company to
make disposals of shares or certain other capital assets on a
tax-exempt basis for UK corporation tax purposes. However, a
disposal of music Catalogues, considered intangible fixed assets
for UK corporation tax purposes, would not qualify for exemption in
the same way.
A disposal of music Catalogues by way of a sale of shares of a
Group subsidiary company by the Company, in order to take advantage
of its ITC tax-exempt status, would not necessarily result in
greater value for the Group, depending on the attractiveness of
such a transaction structure to the prospective purchaser and their
other potential tax considerations on future sales of the acquired
shares.
If the Group were to dispose of all of its Catalogues, an
indicative tax calculation (subject to a number of assumptions in
its preparation - see below) estimates that a potential corporation
tax charge (or equivalent in the US) could be incurred by the Group
subsidiary companies, of approximately $245 million. This has been
calculated based on comparing the Fair Value determined by the
Portfolio Independent Valuer (as a representation of indicative
sales proceeds) to the Catalogues' carrying value as at 31 March
2023.
The calculations assumes a 25% tax rate as: (a) the prevailing
rate of UK corporation tax from 1 April 2023 and (b) a proxy for US
Federal and State corporate income tax. This indicative tax
calculation does not take into account attributes such as UK tax
losses, which could be used to offset some of the taxable gains, or
where the tax treatment of an element of sale proceeds may be
considered to be the sale of a receivable aligned with a Catalogue
rather than part of the disposal value of that Catalogue, which
could result in a materially lower tax charge.
As the Company has not disposed of any catalogues to date, no
such tax liability currently exists.
13. Revenue
1 April 2022
to
1 April 2021
31 March to 31 March
2023 2022
$'000 $'000
--------------------------- ------------ ------------
Mechanical income 5,465 10,657
Performance income 17,972 22,291
Digital downloads income 3,635 4,405
Streaming income 83,886 72,850
Synchronization income 19,381 22,530
Publishing admin income 406 300
Masters income 7,582 8,448
Writer share income 26,076 45,103
Neighbouring rights income 4,120 -
Other income 715 6,037
Producer royalties 8,074 7,763
--------------------------- ------------ ------------
177,312 200,384
--------------------------- ------------ ------------
There is an inherent time lag with royalties between the time a
song is performed, and the revenue being received by the copyright
owner. The revenue accruals are disclosed in Note 8 Trade and other
receivables.
14. Other operating expenses
1 April 2022
to
1 April 2021
31 March to 31 March
2023 2022
$'000 $'000
----------------------------------- ------------ ------------
Aborted deal expenses 468 1,951
Bank charges 50 34
Record label costs 98 -
Charitable donations 293 208
Directors' and officers' insurance 347 366
Disbursements 411 355
Postage, stationery and printing 153 41
Lease liability interest 369 -
HSG staff payroll and expenses 6,244 6,598
HSG restructuring provision 1,028 -
Travel and accommodation fees 499 162
HSG travel and accommodation fees 362 389
Sundry 32 1
----------------------------------- ------------ ------------
10,354 10,105
----------------------------------- ------------ ------------
15. Foreign exchange
1 April 2022 1 April 2021
to to
31 March 31 March
2023 2022
$'000 $'000
------------------------ ------------ ------------
Foreign exchange losses 3,157 14,857
------------------------ ------------ ------------
3,157 14,857
------------------------ ------------ ------------
The foreign exchange impact reflects the effect of movements in
foreign currency exchange rates throughout the year. Currency risk
is discussed further in Note 17.
16. Dividends
A summary of the dividends paid are set out below:
Dividend
per share Total Dividend
Pence $'000
---------------------------------------------------------- ---------- --------------
1 April 2022 to 31 March 2023
Interim dividend in respect of quarter ended 31 March
2022 1.3125 19,313
Interim dividend in respect of quarter ended 30 June
2022 1.3125 17,744
Interim dividend in respect of quarter ended 30 September
2022 1.3125 19,203
---------------------------------------------------------- ---------- --------------
3.9375 56,260
---------------------------------------------------------- ---------- --------------
On 16 March 2023, the Company announced an interim dividend for
the quarter from 1 October 2022 to 31 December 2022 of 1.3125p per
Ordinary Share, paid on 28 April 2023.
Dividend
per share Total Dividend
Pence $'000
---------------------------------------------------------- ---------- --------------
1 April 2021 to 31 March 2022
Interim dividend in respect of quarter ended 31 March
2021 1.3125 20,093
Interim dividend in respect of quarter ended 30 June
2021 1.3125 21,807
Interim dividend in respect of quarter ended 30 September
2021 1.3125 21,214
Interim dividend in respect of quarter ended 31 December
2021 1.3125 21,186
---------------------------------------------------------- ---------- --------------
5.250 84,300
---------------------------------------------------------- ---------- --------------
The Company, being a Guernsey regulated entity, is able to pay
dividends out of capital, subject to the assessment
of solvency in accordance with the Companies Law and subject to
a levered free cashflow test as required by the Revolving Credit
Facility.
17. Financial risk management objectives
Financial risk management objectives
The Group's activities expose it to various types of financial
risk, principally market risk, credit risk, and liquidity risk. The
Board has overall responsibility for the Group's risk management
and sets policies to manage those risks at an acceptable level.
Fair values
Management assessed that the fair values of cash and cash
equivalents, current trade and other receivables and current trade
and other payables approximate their carrying amount largely due to
the short-term maturities and high credit quality of these
instruments. The carrying value of the non-current accrued income
and non-current Catalogue bonus provision reflect their fair
value.
Capital risk management
The Group manages its capital to ensure that it will be able to
continue as a going concern while maximising the capital return to
Shareholders. The capital structure of the Group consists of issued
share capital and retained earnings, as stated in the Consolidated
Statement of Financial Position. In order to maintain or adjust the
capital structure, the Group may repurchase shares or issue new
shares. There are no external capital requirements imposed on the
Group.
As detailed in Note 9, on 30 September 2022 the Company entered
into a new Revolving Credit Facility (RCF) with a commitment of
$700 million which runs for five years until 30 September 2027. On
the same day the Company drew down $607 million to repay in full
the Company's pre-existing J.P. Morgan RCF ($600 million). On 31
March 2023 the Company repaid $7 million of the new RCF.
The Group's investment policy is set out in the Investment
Objective and Policy section of the Annual Report.
Market risk
Market risk is the risk that the fair value or future cash flows
of a financial instrument will fluctuate as a result of changes in
market prices. The Group is exposed to currency risk and interest
rate risk.
a) Currency risk
Currency risk is the risk that the fair values of future
cashflows will fluctuate because of changes in foreign exchange
rates. The revenue earned from the Catalogue of Songs may be
subject to foreign currency fluctuations. Royalties are earned
globally and paid in a number of currencies, therefore the Group
may be impacted by adverse currency movements. The Group will
convert the majority of overseas currency receipts into US Dollars
by agreeing to currency exchange arrangements with collection
agents, or otherwise itself undertaking foreign exchange
conversions.
Dividend payments are denominated in Sterling and also may be
impacted by adverse currency movements. In order to mitigate
currency risk and provide certainty over the US Dollar value of
future Sterling dividend payments the Company entered into US
Dollar to Sterling foreign exchange forward contracts as discussed
in Note 22.
Contract Outstanding Mark to Market Unrealised
Value Contracts equivalent (losses)/gains
Settlement Date GBP'000 $'000 $'000 $'000
---------------- -------- ----------- -------------- ---------------
17 April 2023 11,250 12,501 13,883 1,382
17 July 2023 11,250 12,477 13,906 1,429
16 October 2023 7,500 8,305 9,278 973
16 January 2024 5,000 5,528 6,189 661
15 April 2024 3,750 4,139 4,640 501
16 October 2024 3,750 4,644 4,639 (5)
16 January 2025 2,500 3,101 3,094 (7)
15 April 2025 1,250 1,552 1,546 (6)
15 July 2025 3,750 4,656 4,642 (14)
---------------- -------- ----------- -------------- ---------------
50,000 56,903 61,817 4,914
---------------- -------- ----------- -------------- ---------------
The currencies in which financial assets and liabilities are
denominated are shown below:
Other converted
GBP converted EUR converted to
USD to USD* to USD** USD Total
As at 31 March 2023 $'000 $'000 $'000 $'000 $'000
---------------------------- --------- ------------- ------------- --------------- ---------
Non current and current
receivables 147,955 4,987 205 62 153,209
Held for trading derivative
financial asset 4,914 - - - 4,914
Cash and cash equivalents 32,530 4,074 1,361 - 37,965
---------------------------- --------- ------------- ------------- --------------- ---------
Total financial assets 185,399 9,061 1,566 62 196,088
---------------------------- --------- ------------- ------------- --------------- ---------
Revolving Credit Facility 600,000 - - - 600,000
Held for trading derivative
financial liability 3,395 - - - 3,395
Non current and current
payables 81,958 3,736 232 241 86,167
---------------------------- --------- ------------- ------------- --------------- ---------
Total financial liabilities 685,353 3,736 232 241 689,562
---------------------------- --------- ------------- ------------- --------------- ---------
Net asset/(liability)
position (499,954) 5,325 1,334 (179) (493,474)
---------------------------- --------- ------------- ------------- --------------- ---------
*At the reporting date 31 March 2023, if Sterling had
strengthened/weakened by 10% against the Dollar with all other
variables held constant, the impact on post tax loss and components
of equity would have been $0.5 million higher/lower.
**At the reporting date 31 March 2023, if the EUR had
strengthened/weakened by 10% against the Dollar with all other
variables held constant, the impact on post tax loss and components
of equity would have been $0.1 million higher/lower.
GBP converted EUR converted Other converted
USD to USD* to USD** to USD Total
As at 31 March 2022 $'000 $'000 $'000 $'000 $'000
---------------------------- --------- ------------- ------------- --------------- ---------
Non current and current
receivables 132,276 10,503 1,745 566 145,090
Cash and cash equivalents 25,454 4,314 299 - 30,067
---------------------------- --------- ------------- ------------- --------------- ---------
Total financial assets 157,730 14,817 2,044 566 175,157
---------------------------- --------- ------------- ------------- --------------- ---------
Revolving Credit Facility 600,000 - - - 600,000
Non current and current
payables 31,448 4,883 7 - 36,338
---------------------------- --------- ------------- ------------- --------------- ---------
Total financial liabilities 631,448 4,883 7 - 636,338
---------------------------- --------- ------------- ------------- --------------- ---------
Net asset/(liability)
position (473,718) 9,934 2,037 566 (461,181)
---------------------------- --------- ------------- ------------- --------------- ---------
*At the reporting date 31 March 2022, if Sterling had
strengthened/weakened by 10% against the Dollar with all other
variables held constant, the impact on post tax loss and components
of equity would have been $1.0 million higher/lower.
**At the reporting date 31 March 2022, if the EUR had
strengthened/weakened by 10% against the Dollar with all other
variables held constant, the impact on post tax loss and components
of equity would have been $0.2 million higher/lower.
b) Cash flow and fair value interest rate risk
The Group is exposed to cash flow interest rate risk on cash and
cash equivalents and also on the interest bearing RCF. The RCF
bears a fixed rate of interest plus a floating rate of interest
based on Secured Overnight Financing Rate (SOFR). In order to
mitigate interest rate risk and provide certainty over interest
payments, the Company entered into interest rate swap agreements as
detailed below:
-- From 3 October 2022 until 2 January 2023, interest on all the
drawn debt is based on a three-month fixed SOFR of 5.71% (including
debt margin); and
-- From 3 January 2023, the Company has agreed to enter into
interest rate swaps to hedge $540 million. Of this, $340 million is
hedged for the duration of the RCF (until 30 September 2027) at a
fixed rate of 5.67% (including debt margin); a further $200 million
is hedged until 3 January 2026 at a fixed rate of 5.89% (including
debt margin). The balance remains unhedged to provide flexibility
in the operation of the RCF facility.
At 31 March 2023, the unhedged RCF balance exposed to interest
rate risk was $60 million.
The average interest rate during the year was 5.58%. If interest
rates had been 100 basis points higher and all other variables were
held constant, the Company's loan interest expense would have been
$6.0 million higher.
Credit Risk
Credit risk is the risk of loss due to failure of a counterparty
to fulfil its contractual obligations. The Group is exposed to
credit risk in respect of its contracts with PROs and other
collection societies. This exposure is minimised by dealing with
reputable PROs whose credit risk is deemed to be low given their
respective position in the industry.
As reported in Note 4, there is no impairment of the receivables
balance, credit risk of third parties has been taken into account
when calculating accruals and expected credit loss charge for the
year on HSG advances was $2.2 million (31 March 2022: $1.6
million). The Group is exposed to credit risk through its balances
with banks and its indirect holdings of money market instruments
through those money market funds which are classified as cash
equivalents for the purposes of these Consolidated Financial
Statements.
The table below shows the Group's material cash balances and the
short-term issuer credit rating or money-market fund credit rating
as at the year-end date:
31 March 31 March
2023 2022
Location Rating* $'000 $'000
--------------------- ------------ -------- -------- --------
Barclays Bank UK plc Guernsey/UK A-1 25,063 27,367
BlackRock US AA- 8,435 -
City National Bank US A-2 3,950 2,599
--------------------- ------------ -------- -------- --------
* Rated by Standard & Poor's
Liquidity Risk
Liquidity risk is the risk that the Group will encounter in
realising assets or otherwise raising funds to meet financial
commitments. The Group's liquidity risk is managed by the
Investment Adviser and Directors on a monthly basis.
Liquidity risk is also the risk that the Group may not be able
to meet their financial obligations as they fall due. The Group
maintains a prudent approach to liquidity management by maintaining
sufficient cash reserves to meet foreseeable working capital
requirements.
The Group prepares a 3 year rolling cash forecast, which is
reviewed by the Board. The cash flow forecast includes a
sensitivity analysis with downside scenarios on income streams,
foreign exchange rate movements and interest rate movements. Cash
is delivered with royalty statements, and the majority are
delivered quarterly or semi-annually. A small number of collections
are delivered monthly. Cash is collected and processed throughout
the year by the administrators.
At the reporting date, the Group's financial liabilities
are:
Between Between Total
Carrying Less than 1-3 3-12 1 and 2 and Over contractual
amount 1 month months months 2 years 5 years 5 years cash flows
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
----------------------- --------- --------- ------- -------- -------- --------- -------- ------------
Bank loan and future
interest payments (600,000) - - (30,684) (40,912) (712,507) - (784,103)
Held for trading
financial liability (3,395) 1,139 - (4,534) - - - (3,395)
Amounts owed to
Songwriters (18,799) - (640) (18,159) - - - (18,799)
Catalogue bonus
provision (45,042) - (3,450) (8,512) (16,540) (16,540) - (45,042)
Trade creditors
and accruals (5,846) (4,168) (1,040) (638) - - - (5,846)
Loan interest payable (9,891) (9,891) - - - - - (9,891)
PRO Advances (3,178) - (3,178) - - - - (3,178)
VAT (1,789) (1,789) - - - - - (1,789)
Other creditors (794) (415) - (379) - - - (794)
Lease liability (735) (28) (61) (646) - - - (735)
Corporation tax
payable (67) - (67) - - - - (67)
Directors fees payable (27) (27) - - - - - (27)
----------------------- --------- --------- ------- -------- -------- --------- -------- ------------
(689,563) (15,179) (8,436) (63,552) (57,452) (729,047) - (873,666)
----------------------- --------- --------- ------- -------- -------- --------- -------- ------------
18. Related party transactions and Directors' remuneration
Parties are considered to be related if one party has the
ability to control the other party or exercise significant
influence over the party in making financial or operational
decisions.
All Directors are non-executive. The Directors' remuneration,
excluding disbursements, for the year ended 31 March 2023 amounted
to GBP473,000/$576,355 with no outstanding fees due to the
Directors at 31 March 2023 (31 March 2022: GBP458,360/$613,720,
with outstanding fees of GBP18,750/$24,745). There were no
supplementary fees paid to Directors in the year ended 31 March
2023. Directors are reimbursed for out-of-pocket expenses incurred
in fulfilling their roles, including costs of travel and
accommodation (as required).
Directors' transactions in or holdings in shares of the Company
are not disclosed as related party transactions as they do not
receive shares as part of their remuneration. Any shares held or
transacted are acquired or disposed of in their own right as
Shareholders and as result, it is management's assessment that the
Company has not transacted with the Directors as related parties in
this regard.
19. Material Agreements
Investment Adviser
The Company has entered into an Investment Advisory Agreement
with the Investment Adviser pursuant to which the Investment
Adviser will source Songs and provide recommendations to the Board
on acquisition and disposal strategies, manage and monitor royalty
and/or fee income due to the Company from its copyrights and
collection agents, and develop strategies to maximise the earning
potential of the Songs in the portfolio through improved placement
and coverage of Songs.
During the year responsibility for the maintenance of the
Group's accounting books and records, systems of internal control
and financial reporting transferred from the Administrator to the
Investment Adviser.
The Investment Adviser is entitled to receive an advisory fee
(payable in cash) and a performance fee (usually payable
predominantly in Shares subject to an 18 month lock up
arrangement). The full terms and conditions of the calculation of
the advisory and performance fees are disclosed in the Company's
prospectus, which is available on the Company's website
(https://www.hipgnosissongs.com/). However in summary:
Advisory fee
The advisory fee is calculated at the rate of:
1% per annum of the Average Market Capitalisation up to, and
including, GBP250 million;
ii) 0.90% per annum of the Average Market Capitalisation in
excess of GBP250 million and up to and including GBP500 million;
and
iii) 0.80% per annum of the Average Market Capitalisation in
excess of GBP500 million.
Advisory fees for the year were $12.5 million (31 March 2022:
$16.5 million) with $0.4 million outstanding at 31 March 2023 (31
March 2022: $Nil).
Performance Fee
In respect of each accounting period, the Investment Adviser
(or, where the Investment Adviser so directs, any member of the
Investment Adviser's team) is entitled to receive a performance fee
(the "Performance Fee") equal to 10% of the Excess Total Return
relating to that accounting period provided that the Performance
Fee shall be capped such that the sum of the advisory fee (payable
in respect of the Average Market Capitalisation of Ordinary Shares
only) and the Performance Fee paid in respect of that accounting
period is no more than 5% of the lower of: (i) Net Asset Value; or
(ii) Closing Market Capitalisation at the end of that accounting
period.
The Excess Total Return for an accounting period is calculated
by reference to: (i) the difference between the Performance Share
Price at the end of that Accounting Period and the higher of: (a)
the Performance Hurdle (being issue price compounded by 10% per
annum from initial Admission subject to appropriate adjustments in
certain situations); and (b) high watermark (being the Performance
Share Price at the end of the last Accounting Period where a
Performance Fee was payable); multiplied by (ii) the weighted
average of the number of Ordinary Shares in issue (excluding any
shares held in treasury) at the end of each day during that
accounting period.
For the purposes of calculating the Performance Fee:
"Performance Share Price" means, in relation to each accounting
period, the average of the middle market quotations of the Ordinary
Shares for the 1 month period ending on the last business day of
that accounting period (which shall be adjusted as appropriate: (i)
to include any dividend declared but not paid where the Ordinary
Shares are quoted ex such dividend at any time during that month;
(ii) to exclude any dividend paid in respect of the shares during
that month; and (iii) for the PSP Adjustments). During the year,
the average of the middle market quotations was 81.0p; and
"Performance Share Price Adjustments" means adjustments to the
Performance Share Price to (i) include the gross amount of any
dividends and/or distributions paid in respect of an Ordinary Share
since initial Admission; and (ii) make such adjustments to take
account of C Shares as were agreed between the Company and the
Investment Adviser, acting reasonably and in good faith, at the
time of issuance of such C Shares.
The amount of Performance Fee payable to the Investment Adviser
shall be paid in the form of a combination of: a) cash equal to all
taxes or charges payable with respect to the Performance Fee by the
Investment Adviser or member(s) of the Investment Adviser's Team;
and b) Ordinary Shares ("Performance Shares") which are either
issued by the Company where the Ordinary Shares are on average
trading at par or at a premium to the last reported Operative NAV
per Ordinary Share at the relevant time or purchased from the
secondary market where the Ordinary Shares are on average trading
at a discount to the last reported Operative NAV per Ordinary Share
at the relevant time and transferred to, the Investment Adviser or
member(s) of the Investment Adviser's Team.
The Performance Shares are subject to 18-month lock-up
arrangements. The performance fee for the year ended 31 March 2023
was $Nil (31 March 2022: $Nil).
Administration Agreement
Pursuant to the Administration Agreements: (i) Ocorian
Administration (Guernsey) Limited has been appointed as
Administrator of the Company; and (ii) Ocorian Administration (UK)
Limited has been appointed as administrator to the subsidiaries.
The Administrator or Ocorian Administration (UK) Limited (as
applicable) are responsible for the day-to-day administration of
the Company and its subsidiaries subject to the relevant
Administration Agreement and general secretarial functions required
by the Companies Law. During the year responsibility for the
maintenance of the Group's accounting books and records, systems of
internal control and financial reporting transferred from the
Administrator to the Investment Adviser. For the purposes of the
RCIS Rules, the Administrator is the designated manager of the
Company.
Under the terms of the Administration Agreement between the
Administrator and the Company, the Administrator is entitled to a
fixed fee as at 31 March 2023 of GBP193,000 ($231,600) (31 March
2022: GBP187,500, $246,259) per annum for services such as
administration, corporate secretarial, corporate governance,
regulatory compliance and stock exchange continuing obligations.
Additional ad hoc fees are payable in respect of certain additional
services as determined by the Administration Agreement.
Administration fees for the year to 31 March 2023 amounted to
GBP209,873 ($251,848) (31 March 2022: GBP364,612, $478,875) of
which nil (31 March 2022: GBP43,125, $56,639) was outstanding at
the year end.
Under the terms of the Administration Agreement between Ocorian
Administration (UK) Limited and the subsidiaries the Administrator
is entitled to a fixed fee as at 31 March 2023 of GBP3,500 ($4,200)
(31 March 2022: GBP14,000, $18,387) per subsidiary and a variable
incremental fee per annum per additional Catalogue held by a
subsidiary for services such as administration and corporate
secretarial. Administration fees for the subsidiaries for the year
amounted to GBP296,595 ($355,914) (31 March 2022: GBP489,683,
$673,007) of which nil (31 March 2022: GBP237,490, $311,916) was
outstanding at the year end.
20. Earnings per share
31 March 31 March
2023 2023
Basic Diluted
------------------------------------------------------- ------------- -------------
Loss for the year ($'000) (89,638) (89,638)
Weighted average number of Ordinary Shares outstanding 1,210,360,176 1,210,360,176
------------------------------------------------------- ------------- -------------
Earnings per share (cents) (7.41) (7.41)
------------------------------------------------------- ------------- -------------
31 March 31 March
2022 2022
Basic Diluted
------------------------------------------------------- ------------- -------------
Loss for the year ($'000) (19,443) (19,443)
Weighted average number of Ordinary Shares outstanding 1,175,596,128 1,175,596,128
------------------------------------------------------- ------------- -------------
Earnings per share (cents) (1.65) (1.65)
------------------------------------------------------- ------------- -------------
The earnings per share is based on the loss of the Group for the
year and on the weighted average number of Ordinary Shares
outstanding for the year ended 31 March 2023. As disclosed in Note
11, the Company repurchased Ordinary Shares during the year which
are held as Treasury Shares at year end and these shares are not
included the EPS calculation.
21. Auditor's remuneration
Audit and non-audit fees payable to the Auditors can be analysed
as follows:
1 April 2022
to
1 April 2021
31 March to 31 March
2023 2022
$'000 $'000
--------------------------------------------------- ------------ ------------
PricewaterhouseCoopers CI LLP annual audit fees 753 600
--------------------------------------------------- ------------ ------------
PricewaterhouseCoopers CI LLP annual audit fees 753 600
--------------------------------------------------- ------------ ------------
Pricewaterhouse Coopers CI LLP Interim review fees 53 53
--------------------------------------------------- ------------ ------------
PricewaterhouseCoopers CI LLP non audit fees 53 53
--------------------------------------------------- ------------ ------------
22. Fair value gain on held for trading derivative financial
instruments
The Company has the following derivative financial instruments
in the following line items in the Consolidated Balance Sheet:
31 March 31 March
2023 2022
$'000 $'000
--------------------------------------- -------- --------
Held for trading financial assets
Foreign exchange forward contracts 4,914 -
Held for trading financial liabilities
Interest rate swap arrangements (3,395) -
--------------------------------------- -------- --------
The carrying value of the held for trading financial instruments
represent their fair value at year end.
The fair value gain on the held for trading derivative financial
instruments are set out in the below table:
1 April 2022 1 April 2021
to 31 March to 31 March
2023 2022
$'000 $'000
------------------------------------------------------ ------------ ------------
Fair value gain on foreign exchange forward contracts 6,017 -
Fair value loss on interest rate swap arrangements (3,395) -
------------------------------------------------------ ------------ ------------
2,622 -
------------------------------------------------------ ------------ ------------
23. Presentation Change
The Company has made immaterial changes to the presentation of
the Consolidated Statement of Profit and Loss and accompanying
notes during the year. This has resulted in the following changes
of the comparative figures.
Consolidated Statement of Profit and Loss
As reported
As reported in
in 31 March 31 March
2022 Annual 2023 Annual
Report Report
1 April 2021 1 April 2021
to 31 March Presentation to 31 March
2022 change 2022
$'000 $'000 $'000
----------------------------------------------- ------------- ------------ -------------
Income
Total revenue 200,384 - 200,384
Interest income 5 - 5
Royalty costs (32,041) - (32,041)
----------------------------------------------- ------------- ------------ -------------
Net revenue 168,348 - 168,348
----------------------------------------------- ------------- ------------ -------------
Expenses
Advisory and performance fees (16,548) - (16,548)
Administration fees (1,152) - (1,152)
Legal and professional fees (5,999) - (5,999)
Audit fees (600) - (600)
Brokers' fees (274) - (274)
Directors' remuneration (696) - (696)
Listing fees (34) - (34)
Subscriptions and licences (526) - (526)
Public relations fees (702) - (702)
Catalogue bonus provision - (936) (936)
Charitable donations (208) 208 -
Movement in ECL provision for HSG advances - (1,570) (1,570)
Other operating expenses (12,403) 2,298 (10,105)
Amortisation of Catalogues of Songs (105,787) - (105,787)
Impairment of Catalogues of Songs (1,490) - (1,490)
Amortisation of borrowing expenses (1,635) - (1,635)
Borrowing cost extinguishment - - -
Fixed asset depreciation (712) - (712)
Loan interest (20,377) - (20,377)
Fair value gain on held for trading derivative
financial assets - - -
Finance charges for deferred consideration (212) - (212)
Net loss from joint ventures (836) - (836)
Foreign exchange losses (14,857) - (14,857)
----------------------------------------------- ------------- ------------ -------------
Operating expenses (185,048) - (185,048)
----------------------------------------------- ------------- ------------ -------------
Operating loss for the year before taxation (16,700) - (16,700)
Taxation (2,743) - (2,743)
----------------------------------------------- ------------- ------------ -------------
Loss for the year after tax (19,443) - (19,443)
----------------------------------------------- ------------- ------------ -------------
24. Subsequent Events
On 28 April 2023 the Company's interim dividend of 1.3125 pence
per Ordinary Share in respect of the period from 1 October 2022 to
31 December 2022 was paid.
On 23 June 2023 the Company's interim dividend of 1.3125 pence
per Ordinary Share in respect of the period from 1 January 2023 to
31 March 2023 was declared.
Alternative Performance Measures
For the year ended 31 March 2023
Adjusted EPS
Definition
Loss after tax excluding Total Amortisation, Impairment,
Depreciation, Catalogue Bonus Provision, Restructuring Costs,
Foreign Exchange Losses and Provision for HSG Advances divided by
weighted average number of Ordinary Shares outstanding.
Reason for Use
Adjusted EPS is a strong indicator of Company performance and
profitability after adjusting for non cash and financing items.
Catalogue Bonus Provision has been included in the calculation in
the current year as the Company does not anticipate this provision
to occur at a material level in future years.
31 March 31 March
2023 2022*
Calculation $'000 $'000
---------------------------------------------------------- ------------- -------------
Loss after tax (89,638) (19,443)
Total Amortisation 113,201 107,633
Impairment of Catalogues of Songs 3,901 1,490
Borrowing cost extinguishment 5,007 -
Depreciation 653 712
Lease liability interest 369 -
Catalogue bonus provision 43,757 936
HSG restructuring costs 1,028 -
Foreign exchange losses 3,157 14,857
Fair value gain on held for trading financial instruments (2,622) -
Movement in ECL provision for HSG advances 2,196 1,570
---------------------------------------------------------- ------------- -------------
Adjusted earnings 81,009 107,755
Tax arising on above adjusting items (31,169) (23,348)
---------------------------------------------------------- ------------- -------------
49,840 84,407
Weighted Average number of Ordinary Shares outstanding
(number) 1,210,360,176 1,175,596,128
---------------------------------------------------------- ------------- -------------
Adjusted Earnings per Share (cents) 4.12 7.18
---------------------------------------------------------- ------------- -------------
This figure is the sum of the tax effects of individual
adjusting items other than permanent differences, calculated using
the prevailing 19% corporation tax rate for the periods for UK
items and 21% rate of US Federal corporate income tax for US
items.
Adjusted Operating Costs less Interest Expense
Definition
Operational expenses less Total Amortisation, Impairment,
Depreciation, Catalogue Bonus Provision, Restructuring Costs,
Foreign Exchange Losses, Provision for HSG Advances and Interest
Expense.
Reason for Use
An indicator to Shareholders of the Company's underlying
operational expenditure excluding non cash and financing items.
Catalogue Bonus Provision has been included in the calculation in
the current year as the Company does not anticipate this provision
to occur at a material level in future years.
31 March 31 March
2023 2022*
Calculation $'000 $'000
---------------------------------------------------------- --------- ---------
Operational expenses 233,863 185,048
Total Amortisation (113,201) (107,633)
Impairment of Catalogues of Songs (3,901) (1,490)
Borrowing cost extinguishment (5,007) -
Depreciation (653) (712)
Lease liability interest (369) -
Catalogue bonus provision (43,757) (936)
HSG restructuring costs (1,028) -
Foreign exchange losses (3,157) (14,857)
Fair value gain on held for trading financial instruments 2,622 -
Provision for HSG advances (2,196) (1,570)
Interest expense (33,700) (20,377)
---------------------------------------------------------- --------- ---------
29,516 37,473
---------------------------------------------------------- --------- ---------
* Refer to change in definitions on Alternative Performance
Measures
Annualised Ongoing Charges
Definition
Adjusted Operating Costs less Interest Expense and non-recurring
administrative expenses over a 12-month period.
Reason for Use
Ongoing Charges are a good indicator to Shareholders of the
Company's continuing operating expenses excluding the cost
of financing. These operating expenses are likely to recur in
the foreseeable future.
31 March 31 March
2023 2022
Calculation $'000 $'000
------------------------------------------------ -------- --------
Adjusted Operating Costs less Interest Expense* 29,516 37,474
Non Recurring Administrative Expenses (2,195) (6,063)
27,321 31,411
------------------------------------------------ -------- --------
* Refer to change in Adjusted Operating Costs definition on
Alternative Performance Measures
Distributable Revenues
Definition
Distributable Revenues are the Loss after Tax excluding Total
Amortisation, Impairment, Depreciation, Catalogue Bonus Provision,
Restructuring Costs, Foreign Exchange Losses and Provision for HSG
Advances.
Reason for Use
Distributable Revenues are the adjusted profits attributable to
the Company's revenue activities and are an indicator of the
Company's ongoing ability to pay its dividends, thereby excluding
the impact of IFRS accounting matters, liabilities and costs not
expected to occur at levels of current year.
31 March 31 March
2023 2022
Calculation $'000 $'000
---------------------------------------------------------- -------- --------
Loss after tax (89,638) (19,443)
Total Amortisation 113,201 107,633
Impairment of Catalogues of Songs 3,901 1,490
Borrowing cost extinguishment 5,007 -
Depreciation 653 712
Lease liability interest 369 -
Catalogue bonus provision 43,757 936
HSG restructuring costs 1,028 -
Foreign exchange losses 3,157 14,857
Fair value gain on held for trading financial instruments (2,622) -
Movement in ECL provision for HSG advances 2,196 1,570
81,009 107,755
---------------------------------------------------------- -------- --------
Dividend Cover
Definition
Distributable Revenues divided by the dividend paid during the
year.
Reason for Use
A strong indicator to Shareholders of the Company's ability to
pay a dividend from retained earnings.
31 March 31 March
2023 2022
Calculation $'000 $'000
----------------------- -------- --------
Distributable Revenues 81,009 107,755
Dividend Paid 56,260 84,300
1.44 1.28
----------------------- -------- --------
EBITDA
Definition
The Operating loss before Tax plus Total Amortisation,
Impairment, Depreciation, Catalogue Bonus Provision, Restructuring
Costs, Foreign Exchange Losses, Provision for HSG Advances and
Interest Expense.
Reason for Use
A strong indicator to Shareholders of Company performance and
profitability after adjusting for non cash and financing items.
Catalogue Bonus Provision has been included in the calculation in
the current year as the Company does not anticipate this provision
to occur at a material level in future years.
31 March 31 March
2023 2022*
Calculation $'000 $'000
---------------------------------------------------------- -------- --------
Operating loss (86,630) (16,700)
Total Amortisation 113,201 107,633
Impairment of Catalogues of Songs 3,901 1,490
Borrowing cost extinguishment 5,007 -
Depreciation 653 712
Lease liability interest 369 -
Catalogue bonus provision 43,757 936
Restructuring costs 1,028 -
Foreign exchange losses 3,157 14,857
Fair value gain on held for trading financial instruments (2,622) -
Movement in ECL provision for HSG advances 2,196 1,570
Interest expense 33,700 20,377
117,717 130,875
---------------------------------------------------------- -------- --------
* Refer to change in definitions on Alternative Performance
Measures
Leveraged Free Cash Flow
Definition
Net Cash from operating activities less interest paid,
acquisition related balances and foreign exchange losses.
Reason for Use
A good indicator to Shareholders of the cash position of the
Company and the availability of cash flows to fund dividend
payments.
31 March 31 March
2023 2022--
Calculation $'000 $'000
----------------------------------- -------- --------
Net Cash from operating activities 102,129 84,869
Acquisition related balances - 9,505
Foreign exchange losses 3,157 11,098
Interest paid (23,433) (20,775)
81,853 84,697
----------------------------------- -------- --------
* Refer to change in definitions on Alternative Performance
Measures
Net Debt
Definition
Loan facility amount utilised less cash held at bank.
Reason for Use
Liquidity metric used to determine how well a company can pay
all of its debts if they were due immediately.
31 March 31 March
2023 2022
Calculation $'000 $'000
--------------------- -------- --------
Loan facility amount 600,000 600,000
Cash at bank (37,965) (30,067)
562,035 569,933
--------------------- -------- --------
Non recurring administrative expenses
Definition
Non recurring expenditure included within operating expense.
Reason for Use
A good indicator to Shareholders of expenses not likely to recur
in the foreseeable future.
31 March 31 March
2023 2022*
Calculation $'000 $'000
---------------------------------------- -------- --------
Non recurring expenses included within:
Legal and professional fees 546 2,099
Brokers' fees 122 18
Public relations fees 100 145
Advisory and performance fees - 43
Other operating expenses 1,427 3,758
---------------------------------------- -------- --------
2,195 6,063
---------------------------------------- -------- --------
* Refer to change in definitions on Alternative Performance
Measures
Ongoing Charges %
Definition
Annualised ongoing charges divided by Average Operative NAV.
Reason for Use
To monitor the expenses, which are likely to recur, relative to
the fund size over time.
31 March 31 March
2023 2022
Calculation $'000 $'000
---------------------------- --------- ---------
Annualised Ongoing Charges* 27,321 31,411
Average Operative NAV 2,257,887 2,044,831
1.21% 1.54%
---------------------------- --------- ---------
* Refer to change in Adjusted Operating Costs definition on
Alternative Performance Measures
Operative NAV
Definition
The IFRS NAV adjusted for the Fair Value of the Catalogues of
Songs.
Reason for Use
The Operative NAV reflects the values of the Catalogues of Songs
based on fair values produced by the Portfolio Independent
Valuer.
31 March 31 March
2023 2022
$'000 $'000
---------------------------------------------------- --------- ---------
IFRS NAV 1,434,534 1,582,399
---------------------------------------------------- --------- ---------
Adjustments for revaluations of Catalogues of Songs
to fair value 565,478 457,441
---------------------------------------------------- --------- ---------
Reversal of accumulated amortisation and impairment 316,036 199,800
---------------------------------------------------- --------- ---------
Operative NAV 2,316,048 2,239,640
---------------------------------------------------- --------- ---------
Total Amortisation
Definition
Amortisation of Catalogues of Songs plus amortisation of
capitalised borrowing costs plus finance charges for deferred
consideration.
Reason for Use
Total amortisation is the measure of the non-cash items arising
from accounting treatment and includes the amortisation of
borrowing costs, and is used to evaluate the performance without
any amortisation.
31 March 31 March
2023 2022
Calculation $'000 $'000
-------------------------------------------- -------- --------
Amortisation of Catalogues of Songs 111,583 105,787
Amortisation of capitalised borrowing costs 1,618 1,635
Finance charges for deferred consideration - 212
113,201 107,634
-------------------------------------------- -------- --------
NAV Total Return
Definition
Operative NAV per share plus cumulative dividends paid up to
year end less the Operative NAV per share as at 11 July 2018,
divided by the Operative NAV as at 11 July 2018.
Reason for Use
To show how the assets have performed since IPO to
Shareholders.
31 March 31 March
2023 2022
Calculation $'000 $'000
-------------------------------------- -------- --------
Operative NAV per share 1.9153 1.8491
Cumulative dividends paid to year end 0.2789 0.2159
Operative NAV at IPO (1.2983) (1.2983)
-------------------------------------- -------- --------
0.8959 0.7667
Operative NAV at IPO 1.2983 1.2983
69.01% 59.05%
-------------------------------------- -------- --------
12 Month NAV Total Return
Definition
Operative NAV per share as at year end plus dividend paid during
the 12-month to year end less the Operative NAV per share as at the
beginning of the year divided by the Operative NAV per share as at
the beginning of the year.
Reason for Use
To show how the assets have performed over the past 12 months to
Shareholders.
31 March 31 March
2023 2022
Calculation $'000 $'000
----------------------------------------------------- -------- --------
Operative NAV per share at year end 1.9153 1.8491
Dividend paid during the 12-month period to year end 0.0631 0.0726
----------------------------------------------------- -------- --------
1.9784 1.9217
Operative NAV per share at beginning of year 1.8491 1.6829
6.99% 14.19%
----------------------------------------------------- -------- --------
Change in definitions on Alternative Performance Measures
Definition as reported Definition as reported
in in
Performance March 2023 Annual March 2022 Annual
Measure Report Report Reason for change
-------------------- -------------------------- -------------------------- -----------------------------
Adjusted EPS Loss after tax Loss after tax Catalogue Bonus Provision
excluding Total excluding Total and Restructuring Costs
Amortisation, Impairment Amortisation, Impairment are now included in
of Catalogues of of Catalogues of the Adjusted EPS calculation
Songs, Depreciation, Songs, Depreciation, as they are liabilities
Catalogue Bonus Foreign Exchange recognised based on
Provision, Restructuring Losses and Provision Catalogue performance
Costs, Foreign for HSG Advances in the current year
Exchange Losses divided by weighted which the Company doesn't
and Provision for average number anticipate will incur
HSG Advances divided of Ordinary Shares at a material level
by weighted average outstanding. in future years.
number of Ordinary
Shares outstanding.
-------------------- -------------------------- -------------------------- -----------------------------
Adjusted Operating Operational expenses Operational expenses Catalogue Bonus Provision
Costs less Interest less Total Amortisation, less Total Amortisation, and Restructuring Costs
Expense Impairment, Depreciation, Depreciation, Impairment, are now included in
Catalogue Bonus Foreign Exchange the Adjusted Operating
Provision, Restructuring Losses and Provision Costs less interest
Costs, Foreign for HSG Advances calculation as they
Exchange Losses, less Interest Expense. are liabilities, and
Provision for HSG costs not expected to
Advances and Interest occur to current year's
Expense. levels, in the current
year which the Company
doesn't anticipate will
incur at a material
level in future years.
-------------------- -------------------------- -------------------------- -----------------------------
EBITDA The Operating loss The Operating loss Catalogue Bonus Provision
before Tax plus before Tax plus and Restructuring Costs
Total Amortisation, Total Amortisation, are now excluded from
Impairment, Depreciation, Impairment, Loan the EBITDA calculation
Catalogue Bonus Interest, Depreciation, as they are liabilities
Provision, Restructuring Foreign Exchange recognised based on
Costs, Foreign Losses and Provision Catalogue performance
Exchange Losses, for HSG Advances outside of the operating
Provision for HSG activities of the Company
Advances and Interest which the Company doesn't
Expense. anticipate will incur
at
a material level in
future years.
-------------------- -------------------------- -------------------------- -----------------------------
Leveraged Free Net Cash from Operating Net Cash from Operating To provide increased
Cash Flow Activities less Activities less clarity to investors
interest paid, Purchase of Fixed that interest is considered
acquisition related Assets. to be a levered payment.
balances and foreign The purchase of fixed
exchange losses. assets is not significant
to the calculation and
was removed. The calculation
disclosure has been
expanded to include
Acquisition related
balances and the impact
of Foreign Exchange
to provide clarity to
investors on the Company's
calculation methodology
of Leveraged Free Cash
Flow.
-------------------- -------------------------- -------------------------- -----------------------------
Non recurring Non recurring expenditure Exceptional costs Non recurring expenditure
administrative included within included within in the current year
expenses operating expenses. legal and professional is included throughout
and listing fees operating expenses and
plus Aborted deal is not isolated to legal
expenses plus interest and professional and
costs. listing fees. Interest
costs have been removed
from the calculation
as this calculation
seeks to present the
leveraged free non-recurring
administrative expenses.
-------------------- -------------------------- -------------------------- -----------------------------
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END
FR SFAEDEEDSESW
(END) Dow Jones Newswires
July 13, 2023 02:00 ET (06:00 GMT)
Hipgnosis Songs (LSE:SOND)
過去 株価チャート
から 11 2024 まで 12 2024
Hipgnosis Songs (LSE:SOND)
過去 株価チャート
から 12 2023 まで 12 2024
