Hipgnosis Songs Fund Limited (LON:SONG), which offers investors a pure-play exposure to songs and associated intellectual property rights, and its Investment Adviser, has announced the Company’s interim results for the six-months to 30 September 2023.
Financial Headlines
· Operative NAV per share decreased 9.2% to $1.7392 (31 March 2023: $1.9153), driven primarily by a reduction in the Fair Value of the Portfolio
o As at 30 September 2023, Operative NAV per share in Sterling 142.49p (£:$ exchange rate 1.22055);
o As at 19 December 2023, Operative NAV per share presented in Sterling 136.53p per Share (£:$ exchange rate 1.274).
· Gross revenue from continuing operations for the period $63.2 million (H1 2022-3: $86.4 million)
· Net revenue from continuing operations fell to $54.0 million (H1 2022-3: $76.8 million) primarily driven by $11.9 million reversal of CRB III accrual due to lower anticipated future retroactive payments
· Underlying net revenue (excluding CRB III accruals) up 14.0% to $65.8 million (H1 2022-23: $57.6 million)
· Pro-forma Annual Revenue (PFAR), which shows the gross royalty statements received or receivable within the reporting period and does not include any revenue accruals under IFRS grew 10.4% to $64.9 million (Six months to 30 Sept 2022: $58.8 million)
· Total dividends of 2.6250p per ordinary share paid
o October 2023 dividend withdrawn
o Dividends suspended for at least remainder of financial year
· Total debt of $674.0 million as at 31 September 2023 (31 March 2023: $648.2 million) representing 32.0% of Operative NAV (31 March 2022: 28.0%)
Operational Headlines
· Strategic Review, led by the Board, underway following rejection of the Continuation Resolution at the Company’s AGM
o Shot Tower Capital, LLC as lead adviser to conduct due diligence on the Company’s assets
o Investment Adviser invited to propose alternative terms for their future investment advisory arrangements for the Company
· Robert Naylor appointed non-executive director and Chair of Company’s Board following period end; Francis Keeling and Christopher Mills appointed non-executive directors
· Sale of c.20,000 non-Core songs representing approximately 1% by value of the Company’s investment portfolio sold for $23.1 million, a 14.2% discount to the Portfolio Independent Valuer’s valuation
· KPMG appointed Company’s auditors
Robert Naylor, Chairman, said:
“I am delighted to be appointed to the Board, with strong backing from shareholders. The Board are clear we are acting in their best interests.
“I am pleased with the progress made on the ongoing strategic review. The Board, through its advisers, has begun due diligence on the Company’s assets with Shot Tower LLC, a specialist music rights practice, acting as lead adviser. This process will help the new Board bring forward proposals for delivering value to shareholders.
“Notwithstanding this progress, since I joined the Board there has been a regular occurrence of issues raised as a result of ongoing failures in the financial reporting and control process. Whilst we consider substantial progress has been made in identifying and rectifying these issues, we have had to suspend the dividend for at least the remainder of the year in order to ensure compliance with our banking covenants.
“The newly constructed Board are aware of multiple valuation data points. The Board, made up entirely of non-executive directors, has sought advice from the Investment Adviser, as the Company’s delegated executive function, for their opinion as to the fair value of the Company’s assets.
“Regrettably, the Investment Adviser initially refused to provide an opinion. While the Investment Adviser did eventually provide an opinion to the Board, it was heavily caveated. Whilst the Board sought for correspondence with the Investment Adviser on the matter to be published on the Company’s website in order to provide transparency for shareholders, the Investment Adviser has refused to consent under the confidentiality clauses of the Investment Advisory Agreement.
“We note the announcement from Hipgnosis Song Management stating that they will ‘continue to work in a constructive manner to support the interests of the Company and its shareholders’. On behalf of the Board, I therefore urge the Investment Adviser to provide the Board with their opinion as to the fair value of the Company assets, without caveats, such that we can provide greater certainty and transparency to our shareholders.”
Results call
Dan Pounder, CFO of Hipgnosis Song Management, will be hosting a call for analysts and investors at 0830 BST on 4 January 2023.
To register to participate, please contact [email protected].
A recording of the call will subsequently be placed on the Company’s website www.hipgnosissongs.com/song-investors/
