TIDMSONG
RNS Number : 8405G
Hipgnosis Songs Fund Limited
30 November 2020
30 November 2020
Hipgnosis Songs Fund Limited ("Hipgnosis" or the "Company")
Net Asset Values, C Share Conversion Ratio and Total Voting
Rights
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, The Family (Music) Limited, are pleased to announce
updates to the unaudited Operative NAVs of the Ordinary Shares and
C Shares as at 30 September 2020, and the ratio of the C Share
conversion.
Merck Mercuriadis, Founder of Hipgnosis Songs Fund Limited and
The Family (Music) Limited said : "We are now almost half way
through our third year of having established proven Songs as an
asset class to be reckoned with. Despite the pandemic, the NAV for
the Ordinary Shares grew to 125.35p, a NAV total return of almost
12% before currency movements, in the six month period. The NAV
total return since IPO of 38% demonstrates not only the
uncorrelated strength of these great Songs, but also Hipgnosis'
ability to buy tremendous Songs well and then manage them to add
value. It's gratifying that concurrently w e have one single in the
Top 10 and two in the Top 20 of the Official UK Singles Chart. 'All
I Want For Christmas Is You' by Mariah Carey, from our Walter
Afanasieff catalogue, moves from Number 31 to Number 14 and
'Prisoner' by Miley Cyrus featuring Dua Lipa, co-written by our
Stefan Johnson, enters the chart as a new entry at Number 8."
Operative Net Asset Values
Over the period, the Operative NAVs of both the Ordinary Shares
and C Shares have grown strongly, highlighting the continued
ability of Hipgnosis and its Investment Adviser to execute the
Company's investment strategy of buying Catalogues of the highest
quality and then generating new revenue opportunities through
Active Management. As a result, the Company is pleased to report
strong revenues leading to 1.5x cover of the Ordinary Share
dividend by Net Income and a significant increase in the fair
values of the Company's Catalogues. The increase in fair values was
primarily driven by:
-- strong fair value uplifts in the Catalogues acquired during
the period, proving that the proceeds of the July 2020 and
September 2020 equity fund raises have been deployed well into high
quality and attractive Catalogues
-- streaming revenues starting to be recognised and received
from emerging digital platforms including TikTok and Peloton
-- a reduction in the discount rate used by the Independent
Valuer to value the Company's Catalogues from 9% to 8.5%.
The reduction in the discount rate used by the Independent
Valuer reflects the decreased risk premium associated with music's
ever more stable and predictable earnings as a result of the
increased consumption of music through paid streaming. The Board
and the Investment Adviser are delighted that music valuers are
starting to reflect the true value of music as an asset class and
expect this trend to continue as streaming continues to grow and
music revenues continue to prove their stability.
The Operative NAV per Ordinary Share has increased to 125.35p at
30 September 2020, an increase of 9.8% on a constant currency basis
(7.4% including the impact of FX changes) during the half year
period, notwithstanding an adverse FX impact of 2.85p per Ordinary
Share due to strengthening of GBP / USD FX exchange rates since 31
March 2020. On a constant currency basis, the Operative NAV per
Ordinary Share would be 128.20p.
The total NAV return for the period, represented by the increase
in NAV and dividends paid , on a constant currency basis is 12.0%
(9.5% including the impact of FX changes). On a cumulative basis
since IPO, the NAV total return is 37.9% (including the impact of
FX changes). A full bridge of the movement in the Operative NAV per
Ordinary Share is set out below.
Ordinary Share Operative NAV Bridge from 31 March 2020:
Opening Operative NAV per Ordinary Share 116.73p
Increase in FV of Catalogues(1) assuming a 9%
discount rate 0.64p
--------
Increase in FV of Catalogues resulting from a
reduction in the discount rate to 8.5% 10.48p
--------
Net income(2) 2.79p
--------
Dividends paid -1.93p
--------
FX impact -2.85p
--------
Share issue costs(3) -0.50p
--------
Closing Operative NAV per Ordinary Share 125.35p
--------
The Operative NAV per C Share has increased to 112.39p at 30
September 2020, an increase of 15.5% on a constant currency basis
(14.7% including the impact of FX changes) since admission on 15
July 2020, due to an underlying increase in the Fair Value of
Catalogues, a reduction in the discount rate from 9.0% to 8.5%, and
strong net income, which was offset by a small adverse FX impact of
0.77p per C Share due to strengthening of GBP / USD FX exchange
rates since the catalogue acquisitions. On a constant currency
basis, the Operative NAV per C Share would be 113.16p. A full
bridge of the movement is set out below.
C Share Operative NAV Bridge from 15 July 2020:
Opening Operative NAV per C Share 98.00p
Increase in FV of Catalogues(1) assuming a 9%
discount rate 3.66p
--------
Increase in FV of Catalogues resulting from a
reduction in the discount rate to 8.5% 7.13p
--------
Net income(2) 4.37p
--------
FX impact -0.77p
--------
Closing Operative NAV per C Share 112.39p
--------
The Operative NAVs have been determined in accordance with the
Company's valuation policy described in the Prospectus, including
the appointment of an independent third party valuer.
Conversion Ratio
The Conversion Ratio, as calculated in accordance with the terms
set out in the articles of incorporation and as summarised in the
Placing of C Shares announcement dated 2 July 2020, is 0.9061
Ordinary Shares for each C Share which is held on the record date
of 3 December 2020, which will be the last day for trading in the C
Shares on the London Stock Exchange. The calculation of the
Conversion Ratio is based on the net assets attributable to the
Ordinary Shares and C Shares as at close of business on 30
September 2020, as described above, with an adjustment for the
dividend declared on 8 October 2020 and paid to Ordinary
Shareholders on the register as at 6 November 2020. Entitlements
will be rounded down to the nearest whole Ordinary Share.
On the basis of the Conversion Ratio, a holder of 1,000 C Shares
will receive 906 new Ordinary Shares upon Conversion.
Accordingly, applications have been made for 214,202,503 new
Ordinary Shares to be admitted to the Official List of the FCA and
to the Premium segment of the London Stock Exchange's Main Market
for listed securities ("Admission"). Admission is expected to occur
at 8.00 a.m. on 4 December 2020.
The Ordinary Shares arising on Conversion will rank pari passu
with, and will have the same rights as, the Ordinary Shares of the
Company already in issue, including the right to receive dividends
declared subsequent to Admission.
Total Voting Rights
Following the issuance of the new Ordinary Shares, the Company's
total issued share capital will consist of 1,011,456,797 Ordinary
Shares with one voting right per share. The Company does not hold
any Ordinary Shares in Treasury. The above figure of 1,011,456,797
may be used by shareholders as the denominator for the calculations
by which they will determine if they are required to notify their
interest in, or a change to their interest in, the Company under
the FCA's Disclosure Guidance and Transparency Rules.
Unless otherwise defined, capitalised terms in this announcement
shall have the meaning given to them in the prospectus dated 27
September 2019.
Interim Results
The Interim Results for the six months ended 30 September 2020
are expected to be published on 4 December 2020. The Investment
Adviser will be providing a presentation to investors and analysts
at 10am on that day through the following link:
https://www.lsegissuerservices.com/spark/HipgnosisSongsFundLtd/events/b821cf49-16dd-4514-a17b-efded7dd00c4.
This presentation will be available afterwards on the Company's
website www.hipgnosissongs.com.
(1) Including any right to income on acquisition of
Catalogue
(2) Including amortisation
(3) Relating to September 2020 fundraise which was priced at a
sufficient premium to NAV such that the share issue costs were not
dilutive to the existing shareholders
Note: This announcement contains inside information for the
purposes of Article 7 of Regulation 596/2014 (MAR).
For further information, please contact:
The Family (Music) Limited Tel: +44 (0)1481 742742
Merck Mercuriadis
N+1 Singer - Joint Corporate Broker Tel: +44 (0)20 7496
James Maxwell / James Moat / Amanda 3000
Gray (Corporate Finance)
Alan Geeves / James Waterlow / Sam Greatrex
(Sales)
J.P. Morgan Cazenove - Joint Corporate Tel: +44 (0)20 7742
Broker 4000
William Simmonds / Jérémie
Birnbaum (Corporate Finance)
James Bouverat (Sales)
RBC Capital Markets - Joint Corporate Tel: +44 (0)20 7635
Broker 4000
Will Smith / Elliot Thomas / Lauren
Davies (Corporate Finance)
Lisa Tugwell (Sales)
Ocorian - Company Secretary & Administrator Tel: +44 (0) 1481
Julian Carey 742742
The Outside Organisation Tel: +44 (0)7711 081
Alan Edwards / Nick Caley 843
FTI Consulting Tel: +44 (0)7771 978220;
Neil Doyle/ Paul Harris/ Laura Ewart +44 (0)7809 411882;
+44 (0)7761 332646
All US music publicity enquiries
Fran Defeo +1 917 767 5255
NOTES TO EDITORS
About Hipgnosis Songs Fund Limited
( www.hipgnosissongs.com )
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 over GBP1.05
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 and September 2020. 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.
About The Family (Music) Limited
The Company's Investment Adviser is The Family (Music) 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 The Family (Music) Limited Advisory Board include Nile
Rodgers, The-Dream, Giorgio Tuinfort, Starrah, Nick Jarjour, David
A. Stewart, Bill Leibowitz, Ian Montone, Rodney Jerkins, Bjorn
Lindvall and Chris Helm.
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