Annual Financial Report

Round Hill Music Royalty Fund Ltd

25 April 2023

 

25 April 2023

LEI: 0752UO1CJTV8C39

Round Hill Music Royalty Fund Limited

("Round Hill Music" or the "Company")

Full Year Results for the year to 31 December 2022

STRONG PERFORMANCE DRIVEN BY UNDERLYING CATALOGUE QUALITY, EFFECTIVE SONG MANAGEMENT AND POSITIVE STRUCTURAL TRENDS IN THE MUSIC INDUSTRY

Round Hill Music (LSE: RHM), which invests in evergreen music catalogues with proven longevity and revenue streams that have growth potential, announces its full year results for the year ending 31 December 2022. The Round Hill Music portfolio of catalogues includes songs by artists including iconic 90s Seattle band Alice In Chains, British rock band Bush, Celine Dion, country music star Carrie Underwood, The Supremes, Wilson Pickett and Whitesnake.

To view the Company's annual financial report please follow the link below:

 http://www.rns-pdf.londonstockexchange.com/rns/3519X_1-2023-4-25.pdf

To view the Company's annual financial report in full please follow the link to the Company's website https://www.roundhillmusicroyaltyfund.com/

In accordance with Listing Rule 9.6.1 copies of the documents will be submitted to the UK Listing Authority and will shortly be available for inspection from the National Storage Mechanism at https://data.fca.org.uk/#/nsm/nationalstoragemechanism

This announcement is made in accordance with DTR 6.3.5R (1A). 

FULL YEAR 2022 HIGHLIGHTS

Financial highlights: Strong financial performance and valuation driven by active music catalogue management

·    13% increase in portfolio fair value to US$602.6m (31 December 2021: US$531.1m) driven by active rights management and positive structural music industry tailwinds

·    Second independent valuation commissioned from FTI Consulting post period end affirmed year end valuation report undertaken by Citrin Cooperman, providing a useful benchmark

·    Economic NAV up 13% to US$519.6m, reflecting an Economic NAV per Ordinary Share of US$1.27

·    32% year-on-year increase in Group Revenue for the period to US$32.4m (31 December 2021: US$23.7m)

·    15% like-for-like NPS/NLS growth in Initial Investments reflecting quality of underlying catalogues

·    Two income accretive catalogue investments completed in the period, marking full deployment of US$86.5m of proceeds raised through July 2021 C Share placement:

o  full set of rights (i.e. master and publishing rights) for the Catalogue of David Coverdale, of Whitesnake and Deep Purple fame; and

o  significant majority of the rights to iconic American rock band, Alice In Chains

·    Economic NAV Total Return of 35% delivered since IPO in November 2020

·    New banking facility with City National Bank negotiated post period end on favourable and more flexible lending terms

·    Dividend 0.98x covered, with total per Ordinary Share dividend of US$0.04875 paid in the year, including balance payable for initial dividend for the first quarter to 31 March 2021 (US$0.00375 per Ordinary Share), reflecting a 4.5% yield in line with IPO target  

Operational & portfolio highlights: Diversified portfolio with significant value unlocked via Round Hill's experienced management platform

·    Portfolio of over 120,000 songs across 51 catalogues, diversified by income source, genre and vintage

·    Income comprises revenues from music publishing rights (69%) and masters rights (31%)

·    Diversification into recorded music provides a new set of royalties, generating a new revenue stream for the Company and facilitating revenue growth through active management

·    Income from masters rights grew by 13%, comparing favourably to wider industry where global recorded music revenues grew by 9%[1]

·    Synchronisation income increased by 33% year-on-year, with multiple successful placements of 560 songs across high profile films, television series and brand campaigns, including:

o  "All by Myself", by signer songwriter Eric Carmen, in advertisements for Adobe Photoshop and the popular Mexican snacks company, Sabritas;

o  Spacehog's "In the Meantime" in the trailer for Marvel Studios' Guardians of the Galaxy Volume 3;

o  "Best Day of my Life" in a Nutella advertisement through a relationship with Ferrero; and

o  Alice In Chains' "Rooster" in the Netflix series, Super Pumped

·    Since the year end, the highest value sync yet has been placed for the Company, with Lancôme using "What a Wonderful World" in its latest campaign

·    Receipt of higher digital revenues following new licence agreements with TikTok and Meta on more favourable terms, resulting from strategic focus on rights data quality and management enhancement

Outlook: Music industry continues to thrive with positive outlook and increasing opportunities to grow royalties

·    Goldman Sachs revised its global music revenue forecasts upwards by 5% to US$94.9 billion for 2023 and 10% to US$153 billion for 2030, primarily off the back of a stronger 2021 base where revenues exceeded expectations[2]

·    Underpinned by the sustained success of streaming, which saw a 10.3% growth in subscription revenue, global revenue from recorded music grew by 9% in 2022 to US$26.2 billion[3], an eighth consecutive year of growth

·    New platforms for content consumption represent opportunities to drive further growth for the music industry, through social media, the metaverse and gaming, providing new routes for consumers to discover music and revenue growth through licensing

Robert Naylor, Chairman of Round Hill Music Royalty Fund Ltd, commented:

"Today's results, including the impressive double digit revenue and valuation growth, reflect the strength of the Company's portfolio; the inherent value that Round Hill, the investment manager, has been working to unlock; and the accelerating momentum behind the music industry. The two independent valuation reports commissioned by the Board underline this assessment and our view that Round Hill Music is currently undervalued by the market. We therefore remain confident that, even in challenging market conditions, Round Hill Music Royalty Fund is well positioned to continue to deliver sustainable revenue and value growth."

Josh Gruss, CEO of Round Hill Music LP, the Company's investment manager, said:

"The positive results that we have delivered on behalf of Round Hill Music Royalty Fund stem largely from the efforts of our entire 70 plus team, whose deep expertise in catalogue management and passion for music, when applied to our catalogues, translates directly into sustainable value and revenue growth. The 51 catalogues that make up the Company's portfolio reflect our careful investment approach, which is concentrated on older vintages preceding the early 2010s that have demonstrated durable, time-tested royalty cash flows that have withstood various economic cycles.  

"The opportunities for music monetisation are expanding and Round Hill is well placed to take advantage of these and other structural tailwinds. Given the quality of our catalogues and the positive outlook for the music industry, we are excited and energised about the future."

WEBCAST / CONFERENCE CALL FOR INVESTORS AND ANALYSTS

A live webcast of the results presentation will be available today from 14:00 BST / 09:00 EST for investors and analysts.

Registration for the webcast is available via https://brrmedia.news/RHM_FY22

FOR FURTHER INFORMATION

Round Hill Music LP
Josh Gruss, Founder and CEO	Via Fourth Pillar below
Steve Clark, COO
Cenkos
Sales:
Justin Zawoda-Martin	[phone]
Daniel Balabanoff	[phone]
Andrew Worne	[phone]
Corporate:
James King	[phone]
Will Talkington	[phone]
Fourth Pillar (Financial PR)
Claire Turvey	[phone] / [e-mail]
Lynne Best	[phone] / [e-mail]
Tomas Nevrkla	[phone] / [e-mail]
JTC
Mariana Enevoldsen	[phone]

 About Round Hill Music Royalty Fund Limited

Round Hill Music Royalty Fund invests in high quality, evergreen music catalogues that have proven longevity and revenue streams, with the aim of providing investors with an attractive level of regular and growing income and capital returns, underpinned by the positive structural drivers of the global music industry.

The portfolio is diversified by income stream and music genre, with value created through the proactive and careful management and commercialisation of the repertoire through synchronisation (placement in films, television series and brand campaigns); licensing; data cleaning; and distribution (including across platforms such as Amazon Music, Apple Music, Deezer, and Spotify). 

Its 51 catalogues, totalling over 120,000 songs, include music performed by artists such as Alice in Chains, Bonnie Tyler, Bruno Mars, Céline Dion, Lady A, Louis Armstrong, The Offspring, The Supremes, Whitesnake and Wilson Pickett.

The portfolio of rights includes copyright interests in a musical composition or song (which can be the writer's share, publisher's share and/or performance rights), the rights to the recording of a musical composition or song (the master recording rights), as well as music rights and assets that meet the Company's investment strategy and objectives.  The Company is a non-cellular Guernsey company.

A playlist of RHM's top 50 earners can be listened to on Spotify here. We recommend it served loud.

About Round Hill Music LP (the Investment Manager)

Founded in 2010, Round Hill Music LP is a fully integrated owner and operator of music copyright properties. It currently manages 150+ catalogues, totalling 330,000+ songs with a combined value of circa US$1.2 billion.

With over 70 employees located in the major music and entertainment markets of Nashville, New York, Los Angeles and London, Round Hill Music LP has an experienced management and investment team with an established reputation and extensive expertise in the music and finance industries.

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[1] IFPI 2023 Global Music Report

[2] Goldman Sachs, Music In The Air June 2022

[3] IFPI 2023 Global Music Report

 

END