Bruno Mars and Beyoncé hits have been the best contributors to the £7.2 million of revenues bagged by music royalty trust Hipgnosis(SONG) since its launch last year.
The £356 million trust, which has had a good reception from investors, credited Mars’ ‘Locked out of heaven’, ‘When I was your man’ and ‘Treasure’ – all written by Ari Levine, whose catalogue of 76 songs is owned by the trust – as its top income payers, according to the company’s inaugural results.
Beyonce’s ‘Single ladies (Put a ring on it)’, written by The-Dream and Tricky Stewart, who bring a combined 423 songs to the portfolio, was another top hit for revenue.
The pop queen’s hit Netflix film ‘Homecoming’, about her performance at music festival Coachella, featured 11 songs owned by the trust.
Hipgnosis generated revenues of £7.2 million since its oversubscribed £200 million flotation last July to its financial year-end in March. It raised a further £141 million in a ond-day placing in April.
Two-thirds of revenue came from the US, while 15% was generated in the UK and 4% in Australia, with money also coming in from Germany, Japan, Canada and Brazil.
Hipgnosis met its target dividend of 3.5p per ordinary share for period, representing a yield of 3.5% but aims to produce a 5% yield going forward.
By the end of March the company had only invested £120 million of the £340 million raised, creating a ‘cash-drag’.
‘It should be noted that the catalogues were acquired sequentially throughout the period under review and there was therefore an element of ‘cash drag’ on revenues from uninvested cash on the company’s balance sheet during this initial financial period,’ said Hipgnosis founder Merck Mercuriadis, former manager of Beyoncé among other A-list artists.
However, since the end of its financial period in March, the trust has acquired, or entered into exclusivity agreements to buy catalogues worth a total of £387 million.
Hipgnosis’ investment manager, The Family (Music) Limited, also set up by Mercuriadis has identified a pipeline of investments worth more than £1 billion.
Performance was still strong despite the cash-drag, with net asset value total returns up 6.4%, of which 4.4% came from a revaluation uplift of 7.4% on the portfolio’s assets. The trust had a share price total return of 7.5%.
In addition to the standard NAV – currently estimated at nearly 97p per share – caclulated under IFRS accounting rules, Hipgnosis also reports an ‘operative’ NAV based on the fair value of the music catalogues under an independent valuation. This was 103.27p at 31 March. At 105.5p today the shares stand at an 8% premium over the IFRS measure and a 2.2% over the operative NAV.
The value of global recorded music rose by nearly 10% in 2018, marking the fourth consecutive year of growth and the highest rate since records began in 1997.
The main driver of growth in the global recorded music market is the rise of streaming, which increased by a third in 2018, said Hipgnosis chairman Andrew Sutch.
Streaming made up more than half of total US music revenues in 2018, compared to 9% in 2011. And in the US – the largest music market – paid streaming subscriptions grew by two-fifths in 2018.
Globally, paid subscribers to music streaming services have quadrupled to 200 million in the last two years, according to analysis by JPMorgan, which expects this to reach 2 billion by 2030.
Netflix is not the only visual content streaming service featuring hits owned by Hipgnosis. Celine Dion’s performance on James Corden’s Carpool Karaoke has been viewed 15 million times on YouTube, which featured her forthcoming single ‘Lying Down’ written by Giorgio Tuinfort and is a newly released song in the catalogue owned by the trust.
Hipgnosis is also set to get slice of the action from festival season, with Nile Rogers – an adviser to The Family – & CHIC due to do 20 shows in the UK and Europe this summer. They had already done more than 35 shows in the US with Cher this year, performing more than 12 songs from the Bernard Edwards catalogue owned by the trust.